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									Assuring quAlity
          homes




2012
ANNUAL REPORT
      THE NHBRC:
     AN OVERVIEW
T
      he	 National	 Home	 Builders	 Registration	 Council	 (NHBRC)	 was	
      established	in	1998	in	terms	of	the	Housing	Consumers	Protection	
      Measures	 Act	 (Act	 No.95	 of	 1998)	 (as	 amended)	 –	 herein	 after	
referred	 to	 as	 the	 Act	 –	 and	 is	 mandated	 to	 protect	 the	 interests	 of	
housing consumers and to regulate the home building industry.


Our vision
To be a world-class home builders’ warranty organisation that ensures the
delivery of sustainable, quality homes.

Our mission
To protect the housing consumer and regulate the home building
environment by promoting innovative home building technologies, setting
home building standards and improving the capabilities of home builders.

Our values
•	    Customer	service	excellence
•	    Good	corporate	governance
•	    Research	and	innovation
•	    Commitment	and	moral	integrity
•	    Technical	excellence


Our strategy
•	    T
      	 o	improve	visibility	and	accessibility	in	the	market	while	enhancing	
      interaction	with	our	stakeholders
•	    T
      	 o	position	the	NHBRC	as	a	leader	in	knowledge	creation,	technical	
      and technological building solutions through strategic partnerships
•	    T
      	 o	provide	diversified	services	and	products	in	line	with	changing	
      building requirements and needs


The	NHBRC	–	quality	is	our	priority
KEY MOMENTS IN THE H
  Launched      Developed       Established
    the Eric     ‘breaking     the Gauteng
    Molobi     new ground’        Provincial
   Housing         housing        Customer
 Innovation      typologies   Service Centre
     Hub in                         (offices
Soshanguve,                     relocated to
   Pretoria                    Woodmead)




   2007           2008              2009
HISTORY OF THE NHBRC
        Open days held        In partnership
          in the Eastern   with the National
        Cape, Gauteng,          Department
     KwaZulu-Natal and            of Human
      the Western Cape          Settlements,
     to educate housing     hosted the 12th
         consumers and         International
    home builders about         Housing and
      the NHBRC and its     Home Warranty
             objectives          Conference
                           (IHHWC), the first
                               of its kind on
                                 African soil




                 2010                 2011
CONTENTS
1   LEADERSHIP OVERVIEW      8
                                 6   PERFORMANCE REPORT                 38




2   FINANCIAL HIGHLIGHTS    18
                                 7   FINANCIAL STATEMENTS               62




3   SUSTAINABILITY REPORT   24




4   CORPORATE GOVERNANCE 28




5   AUDIT AND RISK REPORTS 32




                                                NHBRC ANNuAl REpORT 2011/2012   5
SECTION 1
LEADERSHIP	OVERVIEW	
Council                 8

Chairman’s report      11

Acting CEO’s report    13

Executive Committee    14
1.                                      COuNCIl
       Table 1: Council members

               Name                    Position               Qualifications

        1      Prof.	Vukile	Mehana     Chairperson            PhD	(Performance	and	Change)

        2      Ms Mabusha Maja         Council	member         LLB	Hons

        3      Ms	Sharon	De	Gois       Council	member         Master	of	Town	and	Regional	Planning

        4      Dr	Adam	Goliger	        Council	member         PhD	(Civil	Engineering);	Pr.Eng.

        5      Ms	Sibongile	Nene       Council	member         MA

        6      Mr	Bangiso	Mhlabeni     Council	member         LLB

        7      Mr	Paul	Hlahane         Council	member         LLM

        8      Mr	Mthembeni	Mkhize     Council	member         M.Sc.	Arch

        9      Mr	Narain	Kuljeeth      Council	member         LLB




                                         2. Ms Mabusha Maja




     1.	Prof.	Dr	Vukile	Mehana                                              3.	Ms	Sharon	De	Gois




 8     NHBRC ANNuAl REpORT 2011/2012
                                   5.	Ms	Sibongile	Nene




       4.	Dr	Adam	Goliger                                     8.	Mr	Mthembeni	Mkhize




                            7.	Mr	Paul	Hlahane




6.	Mr	Bangiso	Mhlabeni                                    9.	Mr	Narain	Kuljeeth




                                                                   NHBRC ANNuAl REpORT 2011/2012   9
10   NHBRC ANNuAl REpORT 2011/2012
2.                      chairman’s REpORT
     I
       t	has	been	a	pleasure	to	have	served	on	the	Council	of	the	NHBRC.	The	financial	period	ending	March	2012	marks	the	last	
       year	of	the	term	of	office	of	the	current	Council;	the	term	expires	on	30	April	2012.	I	would	like	to	thank	the	members	of	
       Council	for	their	unwavering	support	and	strategic	advice	throughout	this	period.

     The	 current	 Council	 was	 appointed	 in	 May	 2009.	 Its	 term	 at	      excelled,	and	the	content	of	the	conference,	the	arrangements	
     the	 helm	 has	 not	 been	 an	 easy	 ride.	 At	 the	 outset,	 Council	     and	logistics	set	a	very	high	benchmark	for	future	conferences.”
     had to grapple with the realities of operating in a recessionary           For me, one of the proudest moments at this event was the
     economic environment that was spurred on by the global                     official	handover	of	eight	new	homes	by	the	Minister	of	Human	
     economic	 meltdown.	 	 The	 economic	 situation	 facing	 South	            Settlements,	Tokyo	Sexwale,	to	deserving	beneficiaries.	To	mark	
     Africa at the time also had a negative effect on the home                  the inaugural hosting of the conference in Africa, we as the
     building	industry,	and	the	NHBRC	observed	a	decline	in	income	             conference organisers partnered with the national and provincial
     as a result of lower activity and new enrolments.                          Departments	of	Human	Settlements	and	the	City	of	Cape	Town	
                                                                                in	 the	 Legacy	 Project	 –	 a	 project	 to	 build	 eight	 housing	 units	
     During	this	time,	the	NHBRC	had	its	own	structural	challenges	             using	 alternative	 building	 technologies.	 It	 is	 our	 hope	 that	 the	
     that	Council	inherited,	and	it	has	been	a	process	to	align	and	            levels of cooperation as well as the technological, social and
     steer the organisation towards improved customer and service               environmental	 efficiencies	 achieved	 in	 the	 Legacy	 Project	 will	
     delivery.	 While	 this	 is	 a	 work	 in	 progress,	 I	 do	 believe	 the	   serve as a model for future private-public housing partnerships.
     organisation is sound and positioned to serve the interests of
     the	country	and	key	stakeholders.		In	2010,	Council	–	together	            Rectification of unenrolled subsidy projects
     with	 the	 shareholder	 and	 executive	 team	 –	 adopted	 a	 new	          Towards	 the	 end	 of	 the	 2011	 financial	 year,	 the	 NHBRC	 was	
     strategic	 framework	 with	 the	 objective	 of	 ensuring	 that	 the	       called	upon	by	the	Minister	of	Human	Settlements	to	partner	
     organisation’s vision of a warranty organisation that protects             with	 government	 in	 the	 national	 rectification	 of	 defective	
     housing consumers and delivers sustainable, quality homes was              subsidy housing projects. Most of these are projects that
     realised.                                                                  were	undertaken	by	government	prior	to	2002	and	hence	not	
                                                                                enrolled	by	the	NHBRC.	
     Legislative review
     The	NHBRC	was	established	in	terms	of	the	Housing	Consumers	               The	 NHBRC’s	 role	 in	 this	 project	 is	 that	 of	 project	 manager,	
     Protection	 Measures	 Act	 (Act	 No.95	 of	 1998).	 Subsequent	 to	        responsible for forensic engineering investigations and
     the Act coming into force in 1999, a number of laws have been              assessments,	the	development	of	rectification	works	scope	and	
     enacted. These laws have a material and substantive impact on              the enrolment of homes. During the period under review, forensic
     the	 regulatory	 framework	 within	 which	 the	 NHBRC	 functions,	         engineering investigations were conducted in the provinces of
     necessitating a review of the Act and its accompanying rules               Eastern	 Cape	 and	 KwaZulu-Natal.	 The	 NHBRC’s	 draft	 reports	
     and regulations. The internal process of reviewing the Act is              on	 the	 work	 conducted	 in	 these	 two	 provinces	 have	 been	
     now	complete	and	the	NHBRC	has	presented	its	first	draft	of	the	           submitted	to	the	department,	and	final	reports	are	expected	to	
     proposed bill to the shareholder. The proposed changes to the Act          be submitted to government in the near future. The call by the
     were	informed	by	engagements	and	input	by	key	stakeholders.                minister also included a request for recommendations by the
                                                                                NHBRC	 on	 how	 government	 could	 ensure	 delivery	 of	 proper	
     The International Housing and Home                                         and quality houses going forward. This is being considered by
     Warranty Conference                                                        the	Council’s	Industry	Advisory	Committee.	
     From	24-26	September	2011,	the	NHBRC	in	partnership	with	
     the	 National	 Department	 of	 Human	 Settlements	 proudly	                Lastly,	I	would	like	to	extend	a	word	of	thanks	to	the	NHBRC	
     hosted	 the	 12th	 International	 Housing	 and	 Home	 Warranty	            management	team	for	the	good	working	relationship	it	nurtured	
     Conference.	Held	in	Cape	Town,	this	was	the	first	time	that	this	          with	 Council	 over	 the	 past	 three	 years.	 The	 organisation	 has	
     illustrious	international	gathering	took	place	on	African	soil.            weathered	 many	 storms	 during	 this	 time.	 I	 am	 confident	
                                                                                that with the new strategic map, improvements in certain
     The	 conference	 drew	 close	 on	 400	 prominent	 speakers	 and	           operational	 areas	 and	 the	 stronger	 working	 relationship	 that	
     delegates	 from	 across	 the	 globe.	 It	 was	 an	 opportunity	 to	        the organisation now shares with the shareholder, comes a new
     engage	on	issues	such	as	housing	policy	and	finance;	innovation	           era	of	public	service	for	the	NHBRC.
     and technological approaches to the creation of sustainable
     developments;	 the	 impact	 of	 climate	 change;	 managing	 risk	
     and best practices in the home building and home warranty
     industries, both locally and internationally.

     One of the international delegates commented that, “the hosts              Prof. VC Mehana
     and	 organisers	 of	 the	 conference	 in	 Cape	 Town	 have	 really	        Chairperson of council


                                                                                                                            NHBRC ANNuAl REpORT 2011/2012    11
12   NHBRC ANNuAl REpORT 2011/2012
3. ACTING CHIEF EXECuTIVE
      OFFICER’S REpORT
  D
         uring	 the	 past	 year,	 the	 NHBRC	 started	 laying	 the	 foundation	 for	 greater	 regulatory	 effectiveness	 in	 terms	 of	 its	
         people, systems, processes and reputation. Our promise was to display more regulatory muscle, enhance our
         responsiveness	to	market	needs	and	ensure	greater	engagement	with	customers	and	key	stakeholders.	With	this	in	
  mind,	the	organisation	has	adopted	three	key	strategies:	to	improve	visibility	and	accessibility	in	the	market	while	at	the	same	
  time	enhancing	interaction	with	our	stakeholders;	to	position	the	NHBRC	as	a	leader	in	knowledge	creation,	technical	and	
  technological	building	solutions;	and	to	provide	diversified	products	and	services	for	the	home	building	industry.

  Performance                                                                 in terms of the relevant building standards as entrenched in
  I	am	pleased	to	report	that	the	financial	year	has	witnessed	an	            the	 NHBRC’s	 Home	 Building	 Manual.	 The	 inspectors	 have	 an	
  increase in the number of home builder registration renewals.               obligation	to	report	any	failure	to	enrol	a	project	and/or	home	to	
  This	has	been	a	trend	since	2005/2006,	with	an	average	of	77%	              the	Compliance	and	Enforcement	Division.
  renewals in the last four years. The enrolment of homes increased
  to	37	671	during	the	financial	year	as	opposed	to	31	458	in	the	            Continuous business improvement
  previous	financial	year.                                                    Over	the	past	nine	months,	Council	and	the	executive	management	
                                                                              have	 dedicated	 a	 significant	 amount	 of	 time	 to	 a	 detailed	
  Late	enrolments	have	increased	slightly	from	966	in	2010/2011	              investigation	 into	 the	 NHBRC’s	 current	 systems	 and	 business	
  to	980	this	year.	There	is,	however,	a	dedicated	effort	to	reduce	          processes.	We	have	adopted	a	go-forward	systems	strategy	that	
  the	 number	 of	 late	 enrolments	 to	 less	 than	 5%	 of	 the	 total	      sees	the	Information	Technology	Department	being	transformed	
  enrolment	 figure.	 This	 decision	 is	 based	 on	 the	 fact	 that	 late	   into	a	more	effective	Business	Management	Solutions	(BMS)	unit.	
  enrolments	pose	a	risk	not	only	to	the	NHBRC	Warranty	Fund,	                The objective of the change is to focus on a continuous business
  but more importantly to the families residing in such homes.                improvement programme that addresses employee system
  Therefore, a reduction in late enrolments is a positive indication          requirements while at the same time focuses on greatly improving
  that home builders are complying with the Act and that quality              real-time	regulatory	services	to	our	external	stakeholders.
  homes are being built.
                                                                              Training of women and youth
  New	 registrations	 have	 declined	 over	 the	 past	 seven	 years.	         One	 of	 the	 National	 Department	 of	 Human	 Settlements’	 key	
  This could be attributed to a number of factors, including the              priorities remains utilising housing delivery to drive job creation for
  withdrawal	 and	 deregistration	 of	 home	 builders;	 the	 economic	        women	and	youth	in	particular.	To	this	end,	the	NHBRC	has	focused	
  downturn,	 which	 negatively	 impacted	 the	 financial	 viability	 of	      on training and building the capacity of women and youth. During
  home	 builders;	 insufficient	 technical	 capability	 among	 home	          this	 financial	 year	 the	 NHBRC	 undertook	 the	 following	 training	
  builders;	and	possible	saturation	of	the	market.	                           initiatives:	Emerging	Home	Builder	Training;	Women	Build	Training;	
                                                                              Youth	Build	Training;	and	Youth	in	Human	Settlements	Training.	
  Council	has	resolved	to	take	a	zero	tolerance	approach	in	respect	          In	total,	959	learners	were	trained,	of	which	37%	were	women.	
  of	 non-compliance	 with	 the	 Act.	 In	 the	 year	 under	 review,	
  48	 913	 homes	 were	 inspected	 by	 the	 NHBRC’s	 inspectors	              The	 NHRC’s	 Eric	 Molobi	 Centre	 of	 Excellence	 has	 already	
  resulting	in	514	175		inspections	conducted.	A	total	of	156	home	           been	 recommended	 by	 the	 National	 Department	 of	 Human	
  builders	were	suspended	and	15	builders	were	deregistered	for	              Settlements	 to	 be	 utilised	 as	 a	 base	 for	 coordinating	 training	
  failure to comply with the provisions of the Act.                           events for women and youth.

  Establishment of the Compliance and Enforcement                             As	 we	 continue	 on	 our	 journey	 I	 acknowledge	 that	 we	 would	
  Division and the Quality Assurance Division                                 not be where we are today had it not been for the continued
  The	 NHBRC	 has	 established	 a	 Compliance	 and	 Enforcement	              support	of	our	stakeholders	and	staff.	We	have	held	a	number	of	
  Division in order to strengthen the compliance and enforcement              stakeholder	engagements	within	the	business,	driven	by	different	
  provisions of the Act. Among its priorities is the responsibility to        divisions and functional areas. The material issues reported on in
  interdict	the	construction	of	any	project	and/or	home	(including	           this report are a result of these engagements.
  people’s	housing	projects	and	rural	projects)	built	without	being	
  enrolled	 with	 the	 NHBRC,	 and	 to	 prosecute	 any	 home	 builder	
  who has failed to comply in this regard.

  The role of the Quality Assurance Division, on the other hand,
  is to provide inspection services across the country. This division         Dr J Mahachi, Pr. Eng.
  aims to ensure that every home under construction is inspected              ACTING CHIEF EXECUTIVE OFFICER



                                                                                                                         NHBRC ANNuAl REpORT 2011/2012   13
4. EXECuTIVE COMMITTEE
     Table 2: Position and highest qualification of Executive Committee (EXCO) members

             Name                            Position                    Highest qualification(s)

                                             Acting	Chief	Executive	
      1      Dr Jeffrey Mahachi                                          PhD	(Civil	Engineering);	Pr.Eng;	Pr.CPM
                                             Officer

      2      Mr	Courteney	Thorp              Chief	Financial	Officer     H	Dip	Acc;	CA	(S.A)

                                             Executive	Manager:	
      3      Ms Laurie Less                                              Master	of	Public	Administration
                                             Corporate	Services

                                             Acting	Executive	Manager:	
      4      Dr Awelani Malada                                          PhD	(Industrial	and	Systems	Engineering)
                                             Technical	and	IT


     Changes	in	the	EXCO	composition:
     •	 Mr	Sipho	Mashinini,	CEO,	was	placed	on	special	leave	in	June	2011
     •	 Ms	Laurie	Less,	Executive	Manager:	Corporate	Services,	resigned	in	December	2011.




                                               1. Dr Jeffrey Mahachi                   2.	Mr	Courteney	Thorp




14   NHBRC ANNuAl REpORT 2011/2012
3. Ms Laurie Less   4. Dr Awelani Malada




                                           NHBRC ANNuAl REpORT 2011/2012   15
SECTION 2
FINANCIAL	HIGHLIGHTS
     FINANCIAl HIGHlIGHTS
     FIVE-YEAR	FINANCIAL	SUMMARY
     Figure 1: Five-year financial summary



         Premium Earned R’million
           	Net	Income				 	Unexpired	Risk	Provision				 	Unearned	Premium				 	Premium	Received


                                                                                           228
         -180                     2011/2012
                                        -19
                                                                                                                           427

                                                                                                               357
                    -103            2010/2011
                                                                         127
                                                                                                         332

                                                                                                         331
           -171                     2009/2010
                                                                                     202
                                                                                                  300

                                                                                                                                 465
                       -92           2008/2009
                                                                                            238
                                                                                                    319

                                                                                                                                        546
                                  -57 2007/2008
                                                   6
                                                                                                                                                    597




        Total Revenue R’million
           	Total	Revenue				 	Investment	and	Other	Income				 	Fee	and	Technical	Revenue				 	Premium	Earned
                                                                                                                                              741
                                                                   274
        2011/2012
                                                             240
                                                             228

                                                                                                                                                                799
                                                                               330
        2010/2011
                                            112
                                                                                     357

                                                                                                                                       693
                                                                     267
        2009/2010
                                       95
                                                                               331

                                                                                                                                                                      825
                                                               242
        2008/2009
                                             118
                                                                                                   465

                                                                                                                                                          773
                                                       182
        2007/2008
                             45
                                                                                                                     546




18   NHBRC ANNuAl REpORT 2011/2012
 Insurance Claims and Loss Adjustment Expenditure R’million
    	Total	Net	Claims						 	Change	in	claims	provision						 	Actual	Warranty	Claims	paid

                                                                         5
     -10                       2011/2012
                                                                                               15


                                                                                    12
  -11                          2011/2012
                                                                                                                     22


                                                                                                         19
                               2011/2012                             5
                                                                                         14


                                                                                                                                          27
                               2011/2012                                                                        20
                                                                              7


                                                           3
                           2011/2012
                                                                4




Claims paid and Claim Provision Trend R’million
   	Outstanding	Claims	Provision	(Non	Current)				 	Outstanding	Claims	Provision	(Current)				 	Claims	Paid
                                                                                  32
2011/2012                                                  20
                                                15


                                                                                                    39
2010/2011                                                                23
                                                                    22


                                                                                                                            51
2009/2010                                                           22
                                           14


                                                                                                                                 52
2008/2009                                       15
                       7


                                                                                          37
2007/2008                       11
                 4




Surplus for the year
   	Surplus	for	the	year				

2011/2012                                            134


2010/2011                                                                                                 362


2009/2010                                                                         264


2008/2009                                                                                                                 414


2007/2008                                                                                                                                  469




                                                                                                                                      NHBRC ANNuAl REpORT 2011/2012   19
     Table 3: Financial summary for the year ending                          in subsidy project enrolments. Fee revenue included annual
     31 March 2012                                                           registration fees, annual fees, late enrolment fees, renewal fees,
                                                                             subsidy project enrolments and document sales.
      Financial summary
      For	the	year	ended	31	March	2012                                       The	 revenue	 from	 technical	 services	 increased	 from	 R80.4	
                                      R’	Million             R’	Million      million	 to	 R183.7	 million	 (128.4%)	 due	 to	 rectification	 and	
                                                                             forensic	 technical	 service	 fees	 earned	 in	 the	 subsidy	 market	
                                           2012                   2011       (KwaZulu-Natal	and	the	Eastern	Cape).
      Net	income                            741                    799
      Surplus	for	the	year                  134                    362       Income	 from	 investments	 at	 R197.4	 million	 decreased	 by	 R5.7	
                                                                             million	 compared	 to	 the	 previous	 financial	 year	 (2011:	 203.1	
      Equity                              		2603                  2450       million)	 as	 a	 result	 of	 lower	 returns	 in	 the	 bond	 and	 equity	
      Investments                          3694                   3119       portfolios. The entity did not utilise any of the investment fund to
                                                                             finance	working	capital	during	the	year	(2011:	R80	million	utilised).

     OVERVIEW                                                                The annualised return on investments performance is shown
                                                                             in Table 4.

     The	NHBRC’s	performance	should	be	viewed	against	residential	           Table 4: Annualised return on investments performance
     building activity, which has improved after a long period of
     contraction in the planning and construction phase, based on             Investment performance                Annualised percentage
     data	released	by	Statistics	South	Africa.                                Actual return on investments         6.2%
                                                                              CPI                                  6.1%
     The	net	surplus	from	operating	activities	for	the	year	at	R133.6	
     million	was	R228.1	million	lower	than	that	of	the	previous	financial	    Stefi                                5.7%
     year	(2011:	R361.7	million).	The	net	surplus	in	the	current	year	        Benchmark                            8.1%
     was negatively affected by the adjustment for insurance technical
     provisions, as determined annually by actuaries, which increased
     by	R199.1	million	(2011:	R24.6	decrease).                               Expenditure
                                                                             Due	to	adverse	trading	conditions,	the	NHBRC	had	to	implement	
     In	the	previous	financial	year,	an	extraordinary	realised	surplus	      strict	expenditure	controls	and	had	to	review	existing	contracts	
     on	sale	of	financial	assets	(R126.5	million)	was	earned	compared	       to ensure sustainable savings.
     to	the	current	year	realised	profit	of	R33.9	million.	
                                                                             Inspections	and	operating	expenditure	increased	by	30.3%	from	
     Investment	income	was	reported	at	R197.4	million,	which	was	            the	previous	financial	year.	The	expenditure	was	mainly	incurred	
     lower	than	the	previous	year	by	R5.8	million.	The	actual	return	        as a result of inspections to homes under construction in order to
     on investments was lower than the prior year due to lower               mitigate	future	claims	against	the	NHBRC	Warranty	Fund.	
     interest	rates	and	adverse	economic	conditions.	However,	the	
     reported	returns	were	within	the	set	benchmark.                         Technical	 operating	 expenditure	 at	 R186.4	 million	 was	 partly	
                                                                             absorbed by the additional technical revenue generated of
                                                                             R183.7	million.	This	service,	in	terms	of	the	NHBRC	mandate,	
     RESULTS	FOR	THE	YEAR                                                    was	delivered	to	the	subsidy	housing	market.

     Revenue                                                                 Administrative	 expenditure	 was	 controlled	 and	 decreased	
                                                                             marginally	by	R0.6	million.	The	emphasis	on	cost	reduction	was	
     Revenue	 from	 enrolments	 (premiums	 written)	 increased	 by	
                                                                             achieved	 by	 first	 allocating	 the	 expenditure	 necessary	 for	 the	
     28,6%	 from	 R331.9	 million	 to	 R426.8	 million.	 Non-subsidy	
                                                                             Council	 to	 deliver	 on	 its	 mandate	 and	 for	 the	 realignment	 of	
     enrolment	value	increased	by	14.4%,	and	the	subsidy	enrolment	
                                                                             resources,	so	as	to	ensure	that	risks	were	mitigated	and	strategic	
     of	homes	by	143%.	The	increase	in	subsidy	home	enrolments	
                                                                             goals were achieved within the revised budgetary constraints.
     was primarily due to the rollover of projects approved in the
     prior year which are now entering the construction phase. The
                                                                             The emerging contractor training reserve, as governed by
     increase in non-subsidy premiums written was attributed to the
                                                                             Section	15(5)	of	the	Act,	was	not	increased	during	the	financial	
     increase in the number of homes enrolled, compared to the
                                                                             year	as	current	reserves	were	considered	adequate.	Expenditure	
     previous	financial	year.
                                                                             of	R5.4	million	was	incurred	during	the	year.

     The premium earned decreased due to the increase in the
                                                                             Asset management service fees remained constant at
     provision	for	unearned	premium	by	R19.4	million	(2011:	R127.4	
                                                                             R8.8	 million.	 These	 fees	 were	 paid	 to	 the	 fund	 managers	
     million	decrease)	and	the	increase	in	the	change	in	the	unexpired	
                                                                             that	 administer	 the	 investments	 on	 behalf	 of	 the	 NHBRC.	
     risk	provision	amounting	to	R179.7	million	(2012:	R102.8	million	
                                                                             Management fees were charged on a sliding scale on the
     increase).	Insurance	premiums	were	recognised	over	the	period	
                                                                             investments under management.
     of	the	policy	commensurate	with	the	expected	incidence	of	risk.

     Fee	 revenue	 increased	 from	 R31.9	 million	 to	 R56	 million	        Claims	against	the	NHBRC	Warranty	Fund
     (75.6%),	mainly	as	a	result	of	the	153%	(R26.3	million)	increase	       During	 the	 year	 under	 review,	 the	 NHBRC	 settled	 warranty	



20   NHBRC ANNuAl REpORT 2011/2012
claims	 amounting	 to	 R15.4	 million	 (2011:	 R22.3	 million).	 The	   for the purposes of providing assistance to housing consumers
outstanding	 claims	 provision	 consisted	 of	 both	 the	 ‘notified	    under circumstances where the home builder fails to meet their
outstanding claims provision’ and the ‘incurred but not reported        obligations	under	Section	13(e)(b)(i)	of	the	Act.	The	investment	
claims	 provision’.	 The	 ‘notified	 outstanding	 claims	 provision’	   mandate concentrates on the preservation of capital so as
was the portion of outstanding claims provision that related            to	 ensure	 that	 the	 NHBRC	 remains	 financially	 sound	 to	 meet	
to	the	claims	that	were	reported	before	the	financial	year-end,	        housing consumer claims as they arise.
but that were not settled by that date. The ‘incurred but not
reported claims provision’ related to claims that were neither          The	 NHBRC	 revised	 its	 investment	 policy	 during	 the	 previous	
reported,	nor	settled	at	the	financial	year-end.                        financial	 year.	 The	 investments	 were	 independently	 managed	
                                                                        by	Sygnia	Asset	Managers.	
The	net	outstanding	claims	provision	decreased	by	R10.1	million	
reducing	the	insurance	claims	and	loss	adjustment	expense	to	           The	 investment	 strategy	 over	 the	 financial	 year	 increased	
R5.3	million	(2011:	R11.5	million).                                     equity	and	structured	products	exposure.	The	intention	of	the	
                                                                        investment strategy was to move the asset portfolio closer to
The	outstanding	claims	provision	was	determined	at	a	99.5%	             the	medium-term	inflation-linked	liability	profile	of	the	NHBRC.
sufficiency	level.	This	was	consistent	with	the	Financial	Services	
Board’s	draft	guidelines	on	financial	condition	reporting	(FCR).	  	    The	 total	 investment,	 at	 market	 value,	 increased	 from	 R3.1	
These standards require short-term insurers to hold liabilities at      billion	 to	 R3.7	 billion	 during	 the	 financial	 year.	 The	 fair	 value	
a	75%	sufficiency	level,	and	capital	at	a	99.5%	sufficiency	level.		    adjustment,	at	year	end,	increased	from	R5.6	million	to	R24.3	
                                                                        million.
Unexpired	risk	provision
The	 unexpired	 risk	 provision	 estimates	 the	 cost	 of	 insurance	   Cash	flow
claims,	 related	 expenses	 and	 deferred	 acquisition	 costs	 that	    The	net	cash	flow	inflow	from	operating	activities	is	R20	million	
exceed	the	unearned	insurance	premiums,	after	taking	account	           (2011:	R260.6	million).
of	future	investment	income	that	will	arise	during	the	unexpired	
terms	of	policies	in	force	at	the	balance	sheet	date.	In	calculating	   Reserves
the estimated cost of future insurance claims, actuarial and            The non-distributable reserve represents the fair value
statistical projections of the frequency and severity of future         adjustment	of	investments	to	market	value	at	31	March	2012.
insurance claims events are used to project ultimate settlement
costs.                                                                  The	 accumulated	 surplus	 increased	 from	 R2.4	 billion	 to	 R2.5	
                                                                        billion	during	the	current	financial	year.
The	unexpired	risk,	which	arises	primarily	in	the	subsidy	housing	
market,	is	to	ensure	that	this	market	is	independently	solvent.	
The	provision	increased	from	R422.7	million	to	R602.4	million,	
thus reducing insurance premium revenue earned for the year
by	R179.7	million.

Solvency	of	the	NHBRC	Warranty	Fund
The	 independent	 actuarial	 valuation	 of	 the	 NHBRC	 Warranty	
Fund	 confirmed	 that	 the	 fund	 was	 solvent	 and	 in	 a	 sound	
financial	 position	 at	 31	 March	 2012	 when	 it	 was	 valued	 on	
a	 run-off	 basis.	 The	 warranty	 fund	 surplus	 was	 278%	 (2011:	
296%)	 as	 a	 percentage	 of	 investments	 under	 management.	
The	actuarial	liabilities	were	378%	funded	(2011:	396%).	

Investments
The	 NHBRC	 is	 regulated	 in	 terms	 of	 the	 Housing	 Consumers	
Protection	Measures	Act	(Act	No.95	of	1998)	to	establish	a	fund	




                                                                                                                      NHBRC ANNuAl REpORT 2011/2012    21
SECTION 3
SUSTAINABILITY	REPORT
     SuSTAINABIlITY REpORTING
     T
           he	National	Home	Builders	Registration	Council	(NHBRC)	must	remain	sustainable	in	order	to	ensure	that	it	can	carry	
           out	 its	 statutory	 duties	 as	 stipulated	 in	 the	 Housing	 Consumers	 Protection	 Measures	 Act	 (Act	 No.95	 of	 1998).	 The	
           NHBRC	and	the	business	world	are	still	coming	out	of	the	economic	recession;	the	key	building	blocks	for	sustainable	
     organisations, businesses and societies at large remain clear as ethical and legal reminders of the duties incumbent on
     such	institutions.	The	NHBRC	adhered	to	the	Act,	the	Public	Finance	Management	Act	(PFMA)	and	the	principles	related	to	
     integrated	sustainability	as	stipulated	by	the	King	III	Report	when	it	implemented	its	strategies	and	operations	in	the	reporting	
     financial	year.



     ECONOMIC	SUSTAINABILITY                                                    The	 NHBRC	 implemented	 stringent	 expenditure	 controls	
                                                                                and reviewed contracts to ensure sustainable savings due to
                                                                                adverse	 trading	 conditions.	 It	 also	 finalised	 its	 organisational	
     The	NHBRC	is	a	self-sustaining	organisation	that	depends	on	its	           structure to ensure that it would be effective in operating in
     ability	to	build	up	reserve	funds.	The	main	aim	of	the	NHBRC	as	a	         an ever changing and challenging environment. One of the
     warranty scheme is to ensure its ability to meet its claims liabilities.   main	 focuses	 of	 the	 NHBRC	 for	 the	 2011/2012	 financial	 year	
     The	NHBRC	Warranty	Fund,	which	was	independently	actuarially	              was	 to	 increase	 and	 improve	 organisational	 efficiency	 and	
     valuated,	was	both	solvent	and	in	a	sound	financial	position	as	at	        effectiveness.
     31	March	2012	when	it	was	valued	on	a	run-off	basis.	
                                                                                Environmental sustainability
     FINANCIAL	PERFORMANCE                                                      The	 NHBRC	 supports	 collaborations	 and	 engagements	 with	
                                                                                professional	 bodies	 such	 as	 the	 Engineering	 Council	 of	
     Table 5: Financial performance summary 2009-2012                           South	 Africa	 (ECSA),	 the	 South	 African	 Bureau	 of	 Standards	
                               2012           2011       2010        2009       (SABS)	 and	 Agrément	 South	 Africa.	 Such	 collaborations	
                                                                                are	 supported	 by	 the	 Act.	 The	 NHBRC	 has	 also	 established	
      Surplus	for	              134            362        264          414      technical	 infrastructure	 at	 the	 Eric	 Molobi	 Testing	 Centre	 to	
      the	year	(Rm)                                                             test	 building	 materials	 such	 as	 bricks	 and	 blocks.	 The	 SABS	
      Return	on	              5.1%        14.7%          9.8%        21%        also provides test reports of conventional products that have
      equity                                                                    been submitted to it.
      Total assets            3.844           3.567     3.084       2.975
      (Rm)                                                                      The	NHBRC	through	its	technical	section	ensures	that	any	housing	
                                                                                product used in the provision of homes for housing consumers
      Total reserves          2.603           2.450     2.145       1.938       meets	the	set	National	Building	Regulations	requirements.	The	
      (Rm)                                                                      NHBRC	 has	 a	 database	 of	 innovative	 technological	 housing	
      Total technical           977            788        823          848      products	 that	 satisfy	 the	 National	 Building	 Regulations.	 These	
      liabilities	(Rm)                                                          products are assessed based on a number of criteria, including
                                                                                structural	strength	and	stability,	fire,	thermal	performance	and	
     The	 financial	 performance	 of	 the	 NHBRC	 should	 be	 viewed	           durability.	One	of	the	statutory	objectives	of	the	NHBRC	Council	
     against residential building activity for the reporting period, as         is to establish and promote technical standards in the home
     presented in Table 6. The number of homes enrolled increased               building industry.
     by	20%	compared	to	the	previous	financial	year.
                                                                                The home building environment can be intrusive and pervasive
     Table 6: Residential building activity for the year under                  to	 the	 environment	 in	 which	 it	 develops	 and	 expands.	 Each	
     review                                                                     and every home built in an area under the jurisdiction of a
      Category of             Units 2012        Units 2011    % Change          local	 authority	 falls	 within	 the	 scope	 of	 the	 National	 Building	
      housing                                                                   Regulations	and	Building	Standards	Act	(Act	No.103	of	1977)	
                                                                                and	its	regulations,	under	the	Department	of	Trade	and	Industry.	
      Houses	of	<80	                  2 444           2 413            1.3
                                                                                The regulations include mandatory performance requirements
      square metres
                                                                                to support the objectives of the Act, which aim to ensure the
      Houses	of	>	80	                 1 986           1 412           40.7      safety	and	health	of	persons	living	or	working	in	any	building.	
      square metres
                                                                                Guidance	in	the	application	of	the	regulations	may	be	found	in	
      Flats and                       1	538           1 288           19.4      SANS	10400.
      townhouses
      Total                           5	968           5	113           16.7




24   NHBRC ANNuAl REpORT 2011/2012
People
In	 the	 year	 under	 review,	 the	 NHBRC	 was	 in	 the	 process	 of	
finalising	its	organisational	structure	and	filling	some	of	its	vacant	
positions.	 The	 NHBRC	 has	 a	 number	 of	 stakeholders	 that	 it	
interacts with on a regular basis, and this led to management
creating	 the	 position	 of	 Manager:	 Stakeholder	 Relations	 in	 the	
office	of	the	Chief	Executive	Officer.	The	incumbent	in	this	position	
is	meant	to	solidify	and	enhance	the	relations	of	the	NHBRC	with	
important	stakeholders	like	the	National	Department	of	Human	
Settlements,	the	portfolio	committee	of	Human	Settlements	and	
the	select	committee	of	Public	Service	(Housing).

Governance	and	compliance
The	 NHBRC	 is	 mandated	 by	 the	 Housing	 Consumers	
Protection	 Measures	 Act	 (Act	 No.95	 of	 1998)	 to	 comply	 with	
strict	 governance	 principles	 in	 line	 with	 the	 Public	 Finance	
Management	Act	(Act	No.1	of	2000).	The	NHBRC	has,	through	
its	Council	Charter,	endorsed	the	King	III	Code	of	Good	Practice.	
It	continued	to	ensure	its	corporate	governance	structures	and	
practices were aligned with the principles of the code and best
practice	 for	 public	 entities	 falling	 within	 Schedule	 3(A)	 of	 the	
Public	Finance	Management	Act	(Act	No.1	of	2000).




                                                                             NHBRC ANNuAl REpORT 2011/2012   25
SECTION 4
CORPORATE	GOVERNANCE
          CORpORATE GOVERNANCE
     COMPOSITION	OF	THE	COUNCIL                                              •     To regulate the home building industry
                                                                             •     To provide protection to housing consumers in respect
                                                                                   of the failure of home builders to comply with their
     The	Council	comprises	a	minimum	of	seven	and	a	maximum	of	                    obligations in terms of the Act
     15	members,	appointed	by	the	Minister	of	Human	Settlements	in	
                                                                             •     To establish and promote ethical and technical standards
     terms	of	Section	4	of	the	Housing	Consumers	Protection	Measures	
                                                                                   in the home building industry
     Act	(Act	No.95	of	1998).	The	minister	appointed	nine	members	of	
     Council,	 including	 the	 Chairperson	 and	 the	 Deputy	 Chairperson	   •     To improve structural quality in the interests of housing
     in	2009.	As	there	were	no	changes	in	this	composition,	the	total	             consumers and the home building industry
     number	of	Council	members	remained	at	nine.                             •     To promote housing consumer rights and to provide
                                                                                   housing consumer information
     The	composition	of	the	Council	was	as	follows:                          •     To communicate with and assist home builders to register
     •	   Prof.	Vukile	Mehana	(Chairperson)                                        in terms of the Act
     •	    Ms	Mabusha	Maja	(Deputy	Chairperson)                              •     To assist home builders, through training and inspection,
     •	    Ms	Sharon	De	Gois	(member)                                              to achieve and to maintain satisfactory technical
     •	    Dr	Adam	Goliger	(member)                                                standards of home building
     •	    Ms	Sibongile	Nene	(member)                                        •	    To	regulate	insurers	contemplated	in	Section	23(9)(a)
     •	    Mr	Bangiso	Mhlabeni	(member)                                      •	    I
                                                                                   	n	particular,	to	achieve	the	stated	objects	of	this	Section	
                                                                                   in the subsidy housing sector
     •	    Mr	Paul	Hlahane	(member)
     •	    Mr	Mthembeni	Mkhize	(member)
                                                                             Composition	of	Council	and	the	attendance	of	
     •	    Mr	Narain	Kuljeeth	(member)                                       Council	meetings
                                                                             In	 line	 with	 good	 governance	 principles	 as	 espoused	 by	 the	
     THE	NHBRC	COUNCIL                                                       King	 III	 Report	 of	 Good	 Corporate	 Governance,	 the	 PFMA	
                                                                             and	 the	 Council	 Charter,	 Council	 is	 required	 to	 hold	 at	 least	
     Mandate	of	the	Council                                                  four	 meetings	 each	 financial	 year	 in	 order	 to	 exercise	 proper	
                                                                             oversight and responsibility in relation to the activities of the
     The	NHBRC	derives	its	mandate	from	the	Housing	Consumers	               NHBRC.	Table	7	illustrates	the	meetings	that	were	held	in	the	
     Protection	 Measures	 Act	 (Act	 No.95	 of	 1998).	 The	 broad	         year under review, and indicates each member’s attendance.
     mandate	is	outlined	under	Section	3	of	the	Act:
     •    To represent the interests of housing consumers by
          providing	warranty	protection	against	defined	defects	in	          Council	Committees
          new homes                                                          The	 NHBRC	 Council	 is	 supported	 by	 nine	 sub-committees,	




     Table 7: Council meetings and attendance in the year under review

                  MEMBER NAME                             CAPACITY

                                                                                  20-Apr-2011           16-May-2011            27-May-2011              24-Jun-2011
      Rev. Vukile Mehana                      Chairperson                                  √                      √                      √                      √

      Ms Mabusha Maja                         Deputy Chairperson                           √                      ––                     √                      √

      Dr Adam Goliger                         Member                                       √                      √                      √                      √

      Mr Bangiso Mhlabeni                     Member                                       √                      √                      √                      √

      Mr Mthembeni Mkhize                     Member                                       √                      ––                     √                      √

      Mr Paul Hlahane                         Member                                       √                      √                      √                     ––

      Mr Narain Kuljeeth                      Member                                      ––                      ––                     ––                    ––

      Ms Sibongile Nene                       Member                                       √                      √                      √                     ––

      Ms Sharon De Gois                       Member                                      ––                      ––                     ––                    ––

                                              Total Members                                7                      5                      7                      5




28   NHBRC ANNuAl REpORT 2011/2012
               established	 in	 terms	 of	 Section	 5	 of	 the	 Housing	 Consumers	         professional	and	technical),	which	may	impact	on	the	NHBRC’s	
               Protection	Measures	Act,	(Act	No.95	of	1998).	Each	committee	                risk	management	process.
               operates	under	terms	of	reference	approved	by	Council.
                                                                                            Disciplinary	Hearings	Committee	(ad	hoc	
               Fund	Advisory	and	Finance	Committee	                                         sittings)
               The	 Fund	 Advisory	 and	 Finance	 Committee	 is	 responsible	               This committee is responsible for presiding over cases of alleged
               for	 advising	 the	 Council	 on	 the	 prudent	 management	 of	 its	          contraventions of the Act by home builders, and imposing
               funds.	The	committee	makes	recommendations	to	the	Council	                   disciplinary sanctions where home builders are found guilty of
               regarding the setting of fees, procedures and policies for                   contravening the Act.
               approval	 by	 the	 Council,	 as	 well	 as	 on	 all	 matters	 relating	 to	
               the	management	of	risk,	and	the	administration	of	its	fund	or	               Human	Capital	and	Remuneration	Committee
               any	 other	 Council	 fund.	 The	 committee	 regularly	 reviews	 the	         The	 Human	 Capital	 and	 Remuneration	 Committee	 advises	
               financial	reports	of	management,	recommends	the	budget	for	                  Council	on	employees’	remuneration	policies.		This	committee	
               approval	by	Council	and	advises	Council	on	all	financial	matters.            also	 maintains	 a	 corporate	 overview	 of	 the	 Council’s	 human	
                                                                                            capital policies such as employee sourcing, development,
               Registration	Committee			                                                    relations and rewards.
               The	 Registration	 Committee	 is	 responsible	 for	 monitoring	 the	
               registration and deregistration of home builders, and also                   Industry	Advisory	Committee
               recommends	appropriate	policies	and	procedures	to	Council.	It	               The	 Industry	 Advisory	 Committee	 is	 responsible	 for	 giving	
               evaluates owner-builder applications received, and determines                advice	to	the	Council	on	all	matters	relating	to	the	operations	
               whether	home	builders	qualify	in	terms	of	the	Act	for	exemption	             of the home building industry, in addition to acting as a
               from enrolment of their own homes.                                           communication channel between the industry and the
                                                                                            Council.	 Industry	 stakeholders	 are	 invitee	 members	 of	 this	
               Audit	and	Risk	Management	Committee                                          Committee.
               The	 Audit	 and	 Risk	 Management	 Committee	 is	 responsible	
               for	 assisting	 the	 Council	 by	 reviewing	 the	 effectiveness	 of	 its	    Tender	Committee	(Bid	Adjudication	
               systems	 of	 internal	 controls	 and	 risk	 management	 mitigation	          Committee)
               strategies;	 reviewing	 its	 financial	 policies	 and	 procedures;	          The	 Tender	 Committee	 	 adjudicates	 and	 awards	 tenders	
               reviewing	financial	information	reported	to	its	stakeholders;	and	           in	 line	 with	 the	 NHBRC	 procurement	 policy,	 Delegation	
               assessing	 the	 effectiveness	 of	 the	 internal	 and	 external	 audit	      of	 Authority	 Policy	 and	 relevant	 legislation,	 including	 the	
               functions. The committee also ensures the maintenance and                    Preferential	Procurement	Policy	Framework	Act	(Act	No.5	of	
               monitoring	of	the	risk	management	framework.	The	committee	                  2000)	and	its	related	regulations,	and	the	Broad-Based	Black	
               further	 reviews	 the	 risk	 register	 and	 assessment	 reports,	 to	        Economic	 Empowerment	 Act	 (Act	 No.53	 of	 2003),	 among	
               ensure	 efficiency	 and	 effectiveness	 of	 the	 risk	 management	           others.
               strategy and plans.
                                                                                            Disciplinary	Steering	Committee
               Technical	Advisory	and	Claims	Committee
                                                                                            The	 Disciplinary	 Steering	 Committee	 is	 responsible	 for	
               The	 Technical	 Advisory	 and	 Claims	 Committee	 is	 responsible	           approving disciplinary policies, procedures and guidelines to
               for	 evaluating	 remedial	 works	 claims	 submitted	 by	 provincial	         manage the process of disciplining defaulting home builders.
               offices,	 and	 making	 recommendations	 to	 the	 Council	 on	 the	           The committee assesses and approves the preferred charges
               appropriate	manner	of	dealing	with	such	claims.	In	addition,	the	            against home builders who have allegedly breached the
               committee	 advises	 the	 NHBRC	 technical	 section	 with	 regards	           Act, and recommends disciplinary action to the disciplinary
               to	 all	 technical	 aspects	 of	 construction	 and	 innovation	 (both	       committee.



             COUNCIL MEETINGS                                                                                                           TOTALS PER MEMBER

8-Jul-2011             28-Jul-2011            31-Aug-2011             28-Oct-2011           15-Dec-2011           30-Jan-2012
         √                       √                      √                       √                    √                     √                     10
         √                      ––                      √                       √                    √                    ––                      7
         √                       √                      √                       √                    √                    ––                      9
         √                       √                      √                       √                    √                     √                     10
         √                       √                      √                       ––                   ––                    √                      7
         √                       √                      √                       √                    √                     √                      9

        ––                      ––                      ––                      ––                   ––                   ––                      0
         √                       √                      √                       √                    √                     √                      9

        ––                      ––                      ––                      ––                   ––                   ––                      0

         7                       6                      7                       6                    6                     5




                                                                                                                                    NHBRC ANNuAl REpORT 2011/2012   29
SECTION 5
AUDIT	AND	RISK	REPORTS
Audit and Risk Management Report             32

Audit and Risk Management Committee Report   34
                     AuDIT AND RISK
                   MANAGEMENT REpORT
     The	 NHBRC	 through	 its	 various	 business	 activities	 engages	 in	         report	to	the	Council	and	committee	on	developments	related	
     a number of operations, most of which involve the provision                   to	risk;	and	suggest	to	the	Council	new	and	revised	strategies	
     of	 a	 wide	 range	 of	 valuable	 final	 products	 (VFPs)	 to	 protect	       to	investigate	the	risk.
     the interests of housing consumers and to regulate the home
     building	 industry.	 These	 VFPs	 include	 the	 following	 core	              EXCO,	 through	 the	 business	 management,	 implements	 a	 risk	
     activities:                                                                   management system that enables the business to respond
                                                                                   appropriately	 to	 significant	 risks	 that	 could	 impact	 negatively	
     •	    Builder	registrations	and	renewals                                      or	 positively	 on	 the	 business’s	 strategic	 objectives.	 The	 Risk	
                                                                                   Manager	 provides	 support	 and	 facilitates	 risk	 management	
     •	    Project	and	home	enrolments
                                                                                   activities.	 	 However,	 management	 takes	 overall	 responsibility	
     •	    Inspections                                                             for	risk	management.
     •	    Handling	of	complaints	and	conciliations
     •	    Remedial	works                                                          Risk	 reviews	 are	 conducted	 once	 per	 annum,	 with	 the	
                                                                                   intention	 to	 conduct	 them	 on	 a	 quarterly	 basis	 next	 financial	
                                                                                   year.	 Identified	 risks	 are	 ranked	 and	 classified	 into	 categories,	
     By	their	nature,	such	services	or	products	present	a	substantial	             reviewed	 and	 then	 assessed	 by	 EXCO,	 the	 Audit	 and	 Risk	
     level	of	financial	and	operational	risk,	which	must	be	mitigated	             Management	 Committee	 and	 Council	 to	 determine	 the	
     on an organisation-wide and continuous basis if the overall
     sustainability and prosperity of the organisation is to be assured.

     The	 NHBRC	 risk	 policy	 provides	 the	 broad	 framework	 for	
     dealing	with	risk	in	the	organisation’s	businesses.		In	prioritising	
     the	organisation’s	approach	to	risk	management,	it	is	a	primary	
     objective	 to	 manage	 each	 specific	 risk	 so	 as	 to	 minimise	 its	
     impact on the organisation.

     Risk	policy	framework
     The	methodology	set	out	in	global	risk	management	standards,	
     incorporating	King	III,	the	Institute	of	Risk	Management	South	
     Africa	 (IRMSA),	 the	 Committee	 of	 Sponsoring	 Organisations	
     of	 the	 Treadwell	 Commission	 (COSO)	 and	 the	 PFMA,	 among	
     others,	has	been	used	as	a	benchmark	in	developing	policy	and	
     in	monitoring	and	implementing	risk	management	measures.

     The	 key	 elements	 of	 NHBRC’s	 risk	 management	 system	 are	 a	
     defined	risk	policy	framework;	risk	identification;	risk	analysis;	
     risk	 evaluation;	 risk	 remedies;	 monitoring	 and	 review;	 and	
     communication and awareness.

     Oversight	of	risk	management	policy	framework
     The	 Council	 is	 ultimately	 responsible	 for	 ensuring	 that	 the	
     organisation’s	 risk	 management	 practices	 are	 sufficient	 to	
     mitigate,	 to	 the	 most	 cost-effective	 extent	 possible,	 the	 risks	
     present	 in	 the	 organisation’s	 various	 businesses.	 The	 Council	
     delegates	 a	 portion	 of	 this	 responsibility	 to	 its	 Audit	 and	 Risk	
     Management	 Committee.	 Management	 is	 mandated	 and	
     empowered	 by	 the	 Council	 to	 implement	 risk	 management	
     strategies	in	cooperation	with	the	Council	and	the	committee;	



32   NHBRC ANNuAl REpORT 2011/2012
significant	operational,	strategic	and	business	continuity	risks.	         NHBRC	critical	risks	
The	 ratings	 are	 finalised	 once	 the	 mitigation	 plans	 have	 been	
                                                                           The	following	have	been	identified	as	high	risks	to	the	NHBRC:
considered	 and	 executive	 accountability	 assigned	 for	 each	 of	
the	risk	categories.
                                                                           •	   Funding	model	not	flexible	to	change
Emerging	risks	and	risk	management	strategy                                •	   Poor	enforcement	of	the	Act
The	 NHBRC	 is	 subject	 to	 a	 number	 of	 types	 of	 risks,	 many	       •	   	 takeholders’	lack	of	understanding	of	the	NHBRC’s	
                                                                                S
of	 which	 are	 long-term	 risks	 that	 can	 significantly	 impact	 its	        mandate and product offering
businesses.	 The	 Council	 and	 management	 seek	 to	 identify,	           •	   Poor	quality	houses	in	the	subsidy	sector
analyse,	 evaluate	 and	 capitalise	 or	 remedy	 strategic	 risks;	        •    Depletion of the warranty fund
operational	 risks;	 information	 technology	 risks;	 market	 risks;	
regulatory	 risks;	 compliance	 risks;	 human	 resource	 risks;	           •	   Ineffective	brand	positioning
capital	 adequacy	 risks;	 business	 continuity	 risks;	 economic	         •	   Potential	for	fraud	and	corruption
risks;	 reputation	 risks;	 and	 accounting	 and	 financial	 control	      •	   Reputational	risk
risks.
                                                                           •	   Gaps	in	leadership
                                                                           •	   Failure	of	IT	and/or	business	systems
The	Council,	directly	and	via	the	Audit	and	Risk	Management	
Committee,	 works	 with	 management	 on	 an	 ongoing	 basis	
within	 the	 risk	 policy	 framework	 to	 mitigate	 the	 risks	 to	 the	   INTERNAL	AUDIT
organisation’s businesses as they may evolve over time. The
NHBRC	reports	on	strategic,	business	and	process	risks	as	part	            The	 NHBRC	 has	 established	 an	 internal	 audit	 function	 in	
of	the	risk	profile.		The	risk	dashboard	reflects	the	likelihood	and	      complying	with	the	Treasury	Regulations	of	the	Public	Finance	
impact	of	each	of	the	risks	facing	the	entity.                             Management	 Act	 (Act	 No.1	 of	 1999).	 The	 purpose	 of	 the	
                                                                           internal audit function is to continuously provide independent,
Council	and	management’s	key	risk	focus	areas	in	the	past	year	            objective assurance and consulting services to all divisions and
included	outsourced	inspectorate	contractual	risks;	a	sustainable	         sections	 of	 the	 Council,	 to	 ensure	 adequate	 and	 effective	
inspection	model;	Oracle/Siebel	not	being	fully	operational;	the	          systems,	corporate	governance,	risk	management	and	internal	
performance	 management	 system;	 stakeholder	 confidence;	                control.	 The	 function	 is	 headed	 by	 a	 Chief	 Audit	 Executive,	
declining	 revenue;	 an	 above	 inflation	 increase	 in	 operational	      who	 reports	 functionally	 to	 Council	 and	 administratively	 to	
expenses;	and	operational	expenses	not	variably	responding	to	             the	CEO.
declining business volumes.
                                                                           During the year under review, the internal audit function was
The	 level	 of	 commitment	 by	 NHBRC	 management	 and	                    fully	 outsourced	 to	 the	 Rebahale	 Consortium	 for	 a	 period	 of	
employees	 to	 risk	 management	 principles,	 standards	 and	              three	 years.	 The	 contract	 commenced	 on	 1	 March	 2011.	
regulatory	 requirements	 is	 slowly	 improving.	 However,	 this	          However,	 due	 to	 delivery	 shortcomings	 and	 contractual	
needs to be augmented further to achieve a highly integrated,              breaches,	 the	 contract	 was	 terminated	 in	 February	 2012.	 The	
effective	 and	 efficient	 enterprise-wide	 risk	 management	              Chief	Audit	Executive	will	develop	a	short-	and	long-term	plan	
programme that contributes towards achieving a more stable                 for	an	ideal	internal	audit	model	commencing	1	April	2012	for	
and resilient business that effectively pursues the achievement            EXCO	and	Council	approval.
of its mandate.
                                                                           Internal	 audit’s	 responsibilities	 include	 evaluating	 controls	
The	 risk	 management	 section	 therefore	 aims	 to	 ensure	 that	         to	 determine	 their	 effectiveness	 and	 efficiency	 in	 order	 to	
divisions	 and	 sections	 integrate	 the	 risk	 management	 and	           provide management with the assurance that internal controls
compliance processes in their divisional, sectional and individual         are functioning as intended. Furthermore, the internal audit
scorecards, thereby ensuring that all employees are committed              function	 evaluates	 financial	 and	 operational	 performance	
to,	participate	in	and	contribute	towards	the	risk	management	             information in a bid to assist management in ensuring that
process in their day-to-day activities.                                    the	 strategic	 and	 operational	 objectives	 of	 the	 Council	 are	
                                                                           achieved.		Through	the	performance	audits,	gaps	that	may	exist	
During	 the	 reporting	 year,	 the	 risk	 management	 framework	           are	proactively	identified	and	remedial	action	taken	to	ensure	
and	policy	were	approved,	and	an	entity-wide	risk	assessment	              the realisation of strategic and operational objectives.
workshop	 involving	 all	 business	 divisions	 undertaken.	 The	
next	stages	will	involve	training	the	businesses	to	identify	and	          In	its	contribution	to	the	strategic	focus	of	the	organisation,	the	
manage	 risks,	 and	 implementing	 self-assessment	 processes	             internal audit function also assists management by evaluating
within	the	business	to	ensure	that	risk	management	is	integral	            the process through which strategic objectives are established
to	 all	 day-to-day	 activities,	 integrated	 with	 strategy	 execution	   and	 communicated;	 by	 monitoring	 the	 accomplishment	 of	
and performance management.                                                objectives;	 by	 ensuring	 accountability;	 and	 by	 preserving	
                                                                           corporate values.
Health	and	safety
The	NHBRC	respects	the	rights	of	employees	and	stakeholders	               Governance	 in	 all	 areas	 of	 the	 NHBRC	 has	 improved	 as	 a	
to	work	in	a	clean,	safe	and	healthy	environment	and	this	year	            result	 of	 on-going,	 periodic	 audit	 reviews	 and	 risk	 controls	
took	 all	 necessary	 measures	 to	 ensure	 their	 protection	 and	        and governance campaigns through management efforts and
comfort.                                                                   commitment to this issue.



                                                                                                                    NHBRC ANNuAl REpORT 2011/2012   33
     Audit and Risk MANAGEMENT
         Committee Report
     The	 Audit	 Risk	 Management	 Committee	 (ARMCO)	 is	 pleased	         ARMCO	meetings	and	attendances
     to report that it is properly constituted as required by section       The	 ARMCO	 consists	 of	 the	 members	 listed	 below.	 The	
     77	 of	 the	 Public	 Finance	 Management	 Act,	 1999	 (Act	 No.	 1	    Committee	meets	at	least	four	times	per	annum	in	line	with	its	
     of	1999)	and	has	complied	with	its	responsibilities	arising	from	      approved	 charter.	 Six	 (6)	 meetings	 were	 held	 during	 the	 year	
     section	 38(1)(a)	 of	 the	 PFMA,	 1999	 and	 paragraph	 3.1.13	 of	   under	review,	four	(4)	were	scheduled	and	two	(2)	were	special.	
     the	Treasury	Regulations.	The	ARMCO	also	reports	that	it	has	          The attendance record of the members is detailed below:
     adopted	appropriate	formal	Terms	of	Reference	as	its	Charter,	
     and has managed and regulated its affairs in compliance with           Mr.	R.		Moyo	recused	himself	from	ARMCO	in	October	2011.	
     this	Charter.	As	mandated,	we	hereby	report	on	the	functions	          Ms.	S.	Rahiman	was	appointed	Acting	Chairperson	in	December	
     of	the	Committee	for	the	year	ended	31	March	2012.                     2011	for	the	remainder	of	the	financial	year.



      ARMCO MEMBER                                                             SCHEDULED                   SPECIAL           TOTAL NUMBER
                                                                                MEETINGS                  MEETINGS             OF MEETINGS
                                                                                                                                 ATTENDED

      Mr.	R.	Moyo	–	CA(SA):Chairperson-Independent	Member                                    2                       2                        4

      Ms.	S.	Rahiman	–	CA(SA):	Independent	Member                                            4                       2                        6

      Mr.	Z.	Fihlani	–	CA(SA):	Independent	Member                                            2                       2                        4

      Ms.	S.	De	Gois	–	MTRP:	Council	Member                                                  4                        -                       4

      Mr.	M.	Mkhize	–Msc.	Arch:	Council	Member                                               3                        -                       3

      Dr.	A.	Goliger	–	PhD	PrEng:	Council	Member                                             1                       1                        2




34   NHBRC ANNuAl REpORT 2011/2012
Effectiveness	of	Internal	Control                                         Evaluation	of	Financial	Statements	and	
In	carrying	out	its	mandate	as	conferred	to	it	by	its	Charter,	and	       Management	Reports
section	 27.1.8	 of	 the	 Treasury	 Regulations	 (March	 2005),	 the	     In	terms	of	section	3.1.13	of	the	Treasury	Regulations	(March	
Committee	confirms	that,	taking	into	consideration	the	reports	           2005)	the	Committee	has	reviewed	and	evaluated	the	following:
by various assurance sources, it has reviewed and assessed the
following:                                                                •	 Quality	of	Management	Reports;	and
                                                                          •	 The	Annual	Financial	Statements
•	    The	effectiveness	of	the	internal	control	systems;
•	    The	effectiveness	of	the	internal	audit;                            Management	Reports
•	    The	effectiveness	of	the	risk	management	process;                   The	 Committee	 has	 noted	 that	 the	 information	 management	
•	    T
      	 he	scope	of	risk	areas	to	be	covered	by	internal	and	             system	 that	 produces	 management	 reports	 faced	 significant	
      external	audits;                                                    disruptions during the year. The business still relies on disparate
•     The adequacy, reliability and integrity of operational and          systems for reporting, with the attendant system interface
      financial	information	and	reports	used	by	management	               risks	 (the	 reliability	 and	 integrity	 of	 data	 may	 be	 materially	
      and	governance	overseers;                                           compromised),	 however,	 this	 did	 not	 impact	 on	 meeting	 the	
                                                                          statutory	reports	submission	deadlines	as	set	in	section	8(1)	of	
•	    	 he	entity’s	compliance	framework	and	implementation	
      T
                                                                          the	PFMA,	1999.
      thereof;
•	    T
      	 he	reports	on	significant	investigations	and	outcomes	
                                                                          Annual	Financial	Statements
      thereof;	and
                                                                          The	Committee	has:
•	    The	independence	of	the	External	auditors.
                                                                          •	    R
                                                                                	 eviewed	and	discussed	the	audited	financial	statements	
Based	on	information	and	explanations	provided	by	various	                      to	be	included	in	the	Annual	Report	with	the	Auditor-
assurance	sources,	the	Committee	is	of	the	opinion	that	there	                  General	and	the	Chief	Executive	Officer.	It	has	noted	
is	an	urgent	need	for	significant	improvement	in	the	following	                 with	concern	the	matters	raised	in	the	Auditor-General’s	
critical areas:                                                                 report;
                                                                          •	    R
                                                                                	 eviewed	the	Auditor-General’s	management	letter	and	
•	    Technology	and	data	integrity;                                            the	substance	of	Management’s	response	thereto;

•	    Revenue	accounting	especially	in	the	Geotech	area;                  •	    R
                                                                                	 eviewed	changes	in	accounting	policies	and	practices,	
                                                                                where	appropriate;	and
•	    Compliance	including	supply	chain	management;
                                                                          •	    R
                                                                                	 eviewed	significant	adjustments	resulting	from	the	
•	    Key	account	reconciliations;
                                                                                audit.
•	    Ethical	and	fraud	prevention	reviews;
•     Daily and monthly recording and processing of                       The	 Committee	 concurs	 with	 and	 accepts	 the	 Auditor	
      transactions;	and	                                                  General’s	conclusions	on	the	annual	financial	statements,	and	
•	    Performance	information	reporting.                                  recommends	that	the	audited	financial	statements	be	accepted	
                                                                          by	the	Council	and	read	together	with	the	report	of	the	Auditor	
The	 Committee	 is	 unable	 to	 conclude	 that	 the	 internal	            General.
accounting controls are adequately designed and operated
effectively to ensure completeness, accuracy and reliability of
financial	records	for	preparing	the	annual	financial	statements,	
and that accountability for assets and liabilities is maintained.         Name:	Ms.	S.	Rahiman
This	 is	 exacerbated	 by	 a	 serious	 concern	 in	 that	 the	 NHBRC	
had fully outsourced its internal audit services, and during the          Signature:	
year the contract with the service provider was terminated
in	 February	 2012.	 This	 has	 exposed	 the	 NHBRC	 to	 significant	
risks	 and	 as	 a	 result	 no	 effective	 assurance	 was	 provided	 to	
management	and	Council	from	internal	audit.

The	 Committee	 continues	 to	 be	 concerned	 about	 the	 gravity	        Chairperson	of	ARMCO
of	some	of	the	matters	raised	in	the	External	Auditor’s	reports	          Date:	31	July	2012
to	 Management.	 The	 Committee	 also	 noted	 serious	 concerns	
about	lack	of	progress	by	Management	in	addressing	reported	
internal	control	shortcomings.	The	Committee	will	engage	with	
the	newly	appointed	Council	to	consider	various	initiatives	that	
will see a radical positive change regarding implementation and
maintenance	 of	 adequate	 and	 effective	 governance,	 risk	 and	
control	processes	within	NHBRC.




                                                                                                                     NHBRC ANNuAl REpORT 2011/2012   35
SECTION 6
PERFORMANCE	REPORT
                pERFORMANCE REpORT
     BUSINESS	OPERATIONS	AND	                                                Figure 2: Registrations and renewals of home builders
                                                                             over the last seven years
     CUSTOMER	CARE
                                                                                  18,000
     1.	 Registration	and	renewal	of	home	builders                                16,000

                                                                                  14,000
     1.1 Strategic context:
                                                                                  12,000
     	     	 ection	10(1)	of	the	Act	requires	that	all	persons	in	the	
           S
                                                                                  10,000
           business	of	home	building	be	registered	with	the	NHBRC,	
                                                                                    8000
           and all persons in the business of home building renew
                                                                                    6000
           their	annual	membership	with	the	NHBRC.
                                                                                    4000
     1.2 Key activities:
                                                                                    2000
           The evaluation of home builders’ registrations and
           renewals is based on:
                                                                                                     2005/06           2006/07               2007/08            2008/09             2009/10             2010/11         2011/12
           	 	 	 he	technical,	construction	and	financial	capabilities	
           • T                                                                   Registration             4 006             4 595              3 628              3 788               3 616               3 650            2 686
                                                                                  Renewal                10 123            11 033             12 390             11 326              10 366              11 115           11 220
               of the applicant.                                                    Total                14 129            15 628             16 018             15 114              13 982              14 765           13 906

           • A
           	 	 	 	non-refundable	registration	fee	of	R750	(payable	
               to	the	NHBRC	before	registration).
                                                                             Figure 3: Average percentage renewal of registrations
           • A
           	 	 	 n	annual	renewal	fee	of	R600	(payable	to	the	               over the last seven years
               NHBRC	each	year).
     1.3 Performance:                                                            100%

     	     	 ew	home	builders’	registrations	declined	in	the	
           N                                                                     90%

           year	under	review	by	26%,	compared	to	the	last	                       80%




                                                                                                                                                                                                        79%
                                                                                                                                                                77%


                                                                                                                                                                                    75%




                                                                                                                                                                                                                        76%
           financial	year.	Figure	2	shows	the	performance	of	new	                70%
                                                                                                                           72%


                                                                                                                                             71%
                                                                                                         67%




           registrations	and	renewals	over	the	last	seven	years.	It	             60%

           indicates:                                                            50%
                                                                                 40%
              T
           •	 	 he	average	number	of	active	builders	(renewals)	
                                                                                 30%
              –	11	080	per	year.
                                                                                 20%
              T
           •	 	 he	average	number	of	new	entrants	(registrations)	               10%
              –	3	710	per	year.                                                   0%
                                                                                                2005/6


                                                                                                                  2006/7


                                                                                                                                    2007/8


                                                                                                                                                       2008/9


                                                                                                                                                                          2009/10


                                                                                                                                                                                              2010/11


                                                                                                                                                                                                              2011/12




           •		 The	average	total	number	of	builders	–	14	790	
               per year.


           This decline in new registrations can be attributed to,           2. Enrolment and late enrolment of homes
           among others:
     	     •    The cancellation of contracts by potential clients and       2.1 Strategic context:
                the	provincial	Departments	of	Human	Settlements.             	       	 ection	14	of	the	Act	requires	that	all	new	homes	be	
                                                                                     S
           	 	 Voluntary	withdrawals	and	deregistrations.
           •                                                                         enrolled	with	the	Council	15	days	prior	to	construction,	
                                                                                     and	allows	for	late	home	enrolments	provided	the	risk	to	
           •		 Suspensions	by	Council	due	to	non-compliance.
                                                                                     the	Council	is	acceptable.	
           •		 The economic recession.
                                                                             2.2 Key activities:
           •		 Lack	of	financial	and	technical	capability.
                                                                                         A
                                                                                     •		 	 ssessment of enrolment documentation.
                                                                                         W
                                                                                     •		 	 here	the	risk	of	unsuitable	soil	conditions	(i.e.	
     Figure 3 represents the average annual percentage renewal
                                                                                         dolomites)	is	high,	a	detailed	technical	assessment	
     by builders. The percentage renewal has steadily increased
                                                                                         of the submission is performed in liaison with the
     since	 2005/2006.	 The	 average	 renewal	 over	 the	 last	 four	
                                                                                         NHBRC’s	strategic	partner,	the	Council	for	Geoscience.
     years	 was	 77%.	 This	 means	 that	 of	 all	 the	 active	 builders,	
     the	NHBRC	expects	77%	of	them,	on	average,	to	renew	their	                          F
                                                                                     •		 	 or	late	enrolments,	financial	guarantees	may	be	
     registration.                                                                       called	upon	if	the	risk	of	enrolment	is	high.
                                                                                         F
                                                                                     •		 	 or	homes	under	R500	000,	the	enrolment	fee	is	
                                                                                         calculated	as	1.3%	of	the	value	of	the	property	


38   NHBRC ANNuAl REpORT 2011/2012
                  including	land.	For	houses	above	R500	000,	a	sliding	                                                                      failed to respond to legitimate complaints by the housing
                  scale is used to calculate the enrolment fee.                                                                              consumer,	while	Section	13(8)	of	the	Act	entitles	a	housing	
2.3 Performance:                                                                                                                             consumer to a conciliation process with the home builder.
	          	 espite	the	decline	in	registrations	in	the	current	financial	
           D                                                                                                                     3.2 Key activities:
           year compared to last year, the number of enrolments                                                                                  D
                                                                                                                                             •		 	 ay-to-day complaints raised during construction are
           increased, as shown in Figure 4. This perhaps suggests                                                                                attended to in the form of technical non-compliance
           that	although	the	market	has	started	to	recover	from	the	                                                                             notices,	issued	on	site	by	NHBRC	inspectors	(these	
           recession, it is reaching saturation in terms of the number                                                                           complaints	are	not	analysed	and	reported	here).
           of home builders.                                                                                                                     C
                                                                                                                                             •		 	 omplaints	are	lodged	and	dealt	with	through	the	
                                                                                                                                                 provincial customer service centres.
	          I
           	t	should	be	noted,	however,	that	it	is	the	intention	of	the	                                                                         W
                                                                                                                                             •		 	 hen	a	complaint	cannot	be	resolved,	it	is	escalated	
           Council	to	reduce	the	number	of	late	enrolments	as	they	                                                                              to conciliation between the housing consumer and
           pose	a	risk	to	the	warranty	fund.	From	a	risk	perspective,	                                                                           home builder.
           late	enrolments	should	not	exceed	5%	of	the	total	
                                                                                                                                                 A
                                                                                                                                             •		 	 	conciliation	fee	of	R100	is	payable	if	the	enrolment	
           enrolments	figure.	An	analysis	of	late	enrolments	for	the	
                                                                                                                                                 value	is	less	than	R100	000,	and	a	fee	of	R300	is	
           last	seven	years,	as	presented	in	Figure	5,	shows	a	decline	
                                                                                                                                                 payable	if	the	enrolment	value	is	more	than	R100	000.
           in the percentage of houses enrolled late. The reduction
           in late enrolments is a positive indication that home                                                                 3.3 Performance
           builders are complying with the legislation that governs                                                                          The number of complaints received in the year under review
           the home building industry.                                                                                                       totalled	649,	of	which	350	complaints	were	resolved;	169	
                                                                                                                                             complaints	were	under	conciliation;	14	complaints	were	
Figure 4: Total number of enrolments for the last seven years                                                                                under	remedial	works;	and	116	complaints	were	still	in	
                                                                                                                                             progress,	as	at	the	end	of	the	financial	year.
              100.000
                                                                                                                                 The total complaints received and resolved were broken
              90.000
                                                                                                                                 down as follows:
              80.000

              70.000
                                                                                                                                     Type of Complaint             Number Received       Number Resolved

              60.000                                                                                                                 Structural	related                           431                    225
              50.000                                                                                                                 Roof	related                                  36                     22
              40.000                                                                                                                 Maintenance related                          165                     86
              30.000
                                                                                                                                     Others	(e.g.	outisde	                         17                     17
              20.000                                                                                                                 warranty	period)
              10.000                                                                                                                 Total                                        649                    350

                           05/06       06/07        07/08             08/09                09/10       10/11         11/12
      Enrolments           74 095      83 106       84 371            42 228           26 908        31 458         37 671       4.	 Inspections
      Late Enrolment        2 901       4 803        4 208             3 085               2 150              966          980
      Total                76 996      87 909       88 399            45 313          29 033         32 424         38 651
                                                                                                                                 4.1 Strategic context:
                                                                                                                                 	           S
                                                                                                                                             	 ection	5(4)	(b)	of	the	Act	requires	that	all	enrolled	
Figure 5: Late enrolments as a percentage of total enrolments                                                                                homes be inspected.
                                                                                                                                 4.2 Key activities:
    8.0%                                                                                                                                     •		 	 minimum of four inspections are conducted on all
                                                                                                                                                 A
    7.0%                                                                                                                                         enrolled houses.
                                                                               7.3%




                                                                                                                                                 T
                                                                                                                                             •		 	 he number of inspections conducted per house
                                                         6.8%




    6.0%
                                                                                                                                                 depends	on	the	enrolment	value	and	the	complexity	
    5.0%
                                                                                                                                                 of the design of the house in order to mitigate the
                             5.5%




    4.0%                                                                                                                                         risk.
                                          4.6%
                 3.8%




    3.0%                                                                                                                                         H
                                                                                                                                             •		 	 ouses	that	have	been	enrolled	late	may	miss	the	
                                                                                                                                                 foundation	inspection,	and	this	poses	a	huge	risk	to	
                                                                                                   3.0%




    2.0%
                                                                                                                    2.5%




                                                                                                                                                 the	NHBRC.
    1.0%
                                                                                                                                 4.3 Performance
    0.0%
                                                                                                                                             Table 8 shows the number of houses inspected in the non-
                  2005/6




                              2006/7




                                           2007/8




                                                             2008/9




                                                                                 2009/10




                                                                                                    2010/11




                                                                                                                     2011/12




                                                                                                                                             subsidy sector, and the number of inspections conducted
                                                                                                                                             per property type and rand value category, in the year under
                                                                                                                                             review. A total of 223 349 inspections were conducted on
3.	 Complaints	and	conciliations                                                                                                             62 779 houses, providing an average inspection ratio of 3.6.
                                                                                                                                             It	should	be	noted	that	some	of	the	houses	were	still	under	
3.1 Strategic context:                                                                                                                       construction	as	at	the	end	of	the	financial	year,	and	therefore	
	          	 ule	18	of	the	Regulations	to	the	Act	entitles	a	housing	
           R                                                                                                                                 additional inspections are still to be conducted on these
           consumer to lodge a complaint where a home builder has                                                                            properties.


                                                                                                                                                                                  NHBRC ANNuAl REpORT 2011/2012   39
     Table 8: Non-subsidy inspections

         Property Type                         Bracket                                              No. Houses Inspected           No. Inspection Conducted

         PA003                                 0	TO	500	000                                                           5	107                           16 211
         PA003                                 500	001	to	1	million                                                   2	155                            7	520
         PA003                                 1 million to 2 million                                                 1	019                            4 148
         PA003                                 2	million	to	5	million                                                  326                             1	665
         PA003                                 5	million	+                                                              22                                 119
         SUB	TOTAL                                                                                                    8 629                           29 663
         Sectional	Title                       0	to	500	000                                                          18	596                           53	700
         Sectional	Title                       500	001	to	1	million                                                   9	512                           37	043
         Sectional	Title                       1 million to 2 million                                                 2	254                            9 846
         Sectional	Title                       2	million	to	5	million                                                  286                             1 674
         Sectional	Title                       5	million	+                                                              32                                 187
         SUB	TOTAL                                                                                                   30	680                         102	450
         Speculative                           0	TO	500	000                                                           8 726                           27	540
         Speculative                           500	001	to	1	million                                                   5	350                           20	427
         Speculative                           1 million to 2 million                                                 5	414                           23 237
         Speculative                           2	million	to	5	million                                                 3	254                           16	548
         Speculative                           5	million	+                                                             726                             3 484
         SUB	TOTAL                                                                                                   23	470                           91 236
         Grand Total                                                                                                 62 779                         223 349


     5.	 Risk	analysis:	remedial	works	done	                                                    •		 Risk	analysis:
     	 by	the	NHBRC                                                                      	      	    -	   T
                                                                                                          	 he	breakdown	of	the	remedial	costs	for	the	
                                                                                                          financial	year	is	shown	in	Figure	6	and	the	
                                                                                                          associated	risk	analysis	in	Table	9.
     5.1 Strategic context:
                                                                                         	      	    -	   	n	the	current	financial	year,	the	NHBRC	spent	
                                                                                                          I
     	        S
              	 ection	17	of	the	Act	requires	the	NHBRC	to	rectify	any	
                                                                                                          R15	million	on	remedial	works,	which	was	
              structural defects where a home builder has failed to do so.
                                                                                                          substantially lower than in the previous year, as
     5.2 Key activities:                                                                                  shown	in	Figure	7.	However,	this	figure	should	
                  T
              •		 	 he	NHBRC,	through	its	provincial	customer	service	                                    not be read in isolation to the cost spent in
                  centres,	assesses	the	extent	of	the	structural	damage.	                                 mitigating	the	risk	through	inspections.	The	
                  If	the	home	builder	is	not	willing	to	rectify	the	                                      claims incidence ratio for the year as presented in
                  damage,	the	NHBRC	uses	the	warranty	fund	to	fix	                                        Table	9	was	0.49%,	which	was	acceptably	below	
                  the defect up to the lesser amount of either the                                        the	4%	target.	The	average	claims	paid	of	9%	
                  enrolment	value	or	R500	000,	and	disciplinary	action	                                   was	way	below	the	risk	limit	of	32%.
                  is	taken	against	the	defaulting	home	builder.

     Table 9: Risk analysis for remedial works

         Description                     EC              FS             GP        KZN               MP          NW            NC         LP         WC           TOTAL
         No.	of	conciliations	
         closed                          25              15             35          3                73          11                      11           5            178
         No.	of	enrolments            1 982          1 328       21	220         1	855           2	552         1	707       1	541       1 711       4	755          38	651
         No.	of	claims	paid              27              16             53         13                19          24            5          5          28            190
         Claims	paid	costs(net)	
         -	R                       1	354	964      210	905     5	725	695      2	032	150       1	577	178    1	216	351     397 849    1 313 234   1	465	709    15	294	035
         Conciliation	incidence	
         per	enrolment	(%)            1.26%         1.13%        0.16%          0.16%           1.86%        0.64%       0.00%        0.64%       0.10%          0.46%
         Claims	incidence	per	
         enrolment	(%)                1.36%         1.20%        1.20%          0.25%           0.70%        0.74%       1.41%        0.30%       0.59%          0.49%
         Average claims paid
         cost	-	R                    50	184        13 182       108	032       156	319          83	009        50	681      79	570     262 647      52	347          80	495
         Average claims paid
         cost	-%                        6%             2%           13%          18%                10%         6%            9%       31%          6%             9%



40   NHBRC ANNuAl REpORT 2011/2012
Figure 6: Breakdown of remedial works                                                                   6.3 Performance:
                                                                                                               •		 	 igure 8 illustrates the performance of the subsidy
                                                                                                                   F
                    R160 000             R450 000                                                                  sector with respect to project and home enrolments
                                                          R1 310 000
                                                                                                                   over	the	last	five	years.	In	the	current	year,	35	426	
           R260 000
                                                                                                                   houses were enrolled for project enrolment and 138
                                                                                             Fdn
                                                                                                                   883 for home enrolment.
                                                                                             Sub
                                                                                                                   T
                                                                                                               •		 	 he	NHBRC	still	faces	challenges	with	a	number	
                                                    R2 620 000                               Super
                                                                                                                   of	provincial	Departments	of	Human	Settlements	
                                                                                             Roof                  in terms of ensuring that all projects are enrolled
                  R6 350 000
                                                        R2 910 000
                                                                                             Fees                  timeously.	Proactively,	the	NHBRC	has	engaged	the	
                                                                                             Settle                departments with the objective of ensuring that all
                                                                                             Drain
                                                                                                                   houses, including rural and peoples housing process
                                                                                                                   (PHP)	projects,	are	enrolled.	A	positive	response	was	
                                                                                             Transp
                                                                                                                   received, and it is envisaged that enrolments will
                                          R8 000 000                                         Acc
                                                                                                                   increase	in	the	next	financial	year,	in	line	with	the	
                                                                        R450 000
                                                                                                                   National	Department	of	Human	Settlements’	housing	
                                                                                                                   delivery plan.
Figure 7: Remedial works expenditure over last five years
                                                                                                        Figure 8: Enrolment in the subsidy sector over the last
                                  Remedial Work Expenditure                                             five years

                   25                                                                                             160 000

                                                                                                                  140 000
                   20
                                                                                                                  120 000

                                                                                                                  100 000
                   15
    R’Million




                                                                                                                   80 000

                                                                                                                   60 000
                   10
                                                                                                                   40 000

                   5                                                                                               20,000

                                                                                                                          -
                                                                                                                                2007/08   2008/09   2009/10   2010/11    2011/12
                   -
                                                                                                            Project Enrolment   89 997    75 633    29 846     27 348     35 426
                               2007/08        2008/09            2009/10           2010/11    2011/12
                                                                                                            Home Enrolment      72 929    70 087    69 456     72 394    138 883
                R’Million        5                  7              14                22            15


                                                                                                        6.4 NHBRC strategic intervention
                                                                                                        	      I
                                                                                                               	n	order	to	align	to	the	National	Department	of	Human	
6.	 Subsidy	sector                                                                                             Settlements’	delivery	plan,	the	NHBRC	implemented	the	
                                                                                                               following strategies:
6.1 Strategic context:                                                                                             D
                                                                                                               •		 	 eveloper	workshops	–	Comprehensive	workshops	
	               	 ection	14	of	the	Act	requires	all	new	homes	to	be	
                S                                                                                                  between	the	NHBRC,	provincial	Departments	of	
                enrolled	15	days	prior	to	construction.	This	includes	                                             Human	Settlements	and	municipalities	were	held	to	
                houses	built	using	the	Peoples	Housing	Process	(PHP)	and	                                          share	information	regarding	the	NHBRC’s	technical	
                as part of rural projects.                                                                         requirements	and	the	process	for	enrolling	PHP	and	
                                                                                                                   rural projects.
6.2 Key activities:
                                                                                                                   ‘
                                                                                                               •		 	On-site’	assessments	–	Project	submissions	were	
                    I
                •		 	n	line	with	the	Act	and	the	Housing	Code,	
                                                                                                                   assessed for enrolment at provincial departments’
                    developers of government subsidy projects are
                                                                                                                   premises	by	NHBRC	professionals	to	ensure	
                    required to register and enrol all projects with the
                                                                                                                   immediate	feedback	and	guidance	regarding	
                    NHBRC.	The	NHBRC	uses	various	risk	management	
                                                                                                                   compliance.
                    tools in assessing subsidy projects, including
                    geotechnical	assessments;	inspections	of	the	top	                                              D
                                                                                                               •		 	 ecentralisation	of	services	–	the	NHBRC	
                    structure and infrastructure services and structural                                           decentralised most of its services, including
                    assessments of both the sub- and super- structures.                                            geotechnical assessments, in order to ensure a more
                                                                                                                   effective	service	to	its	clients	and	stakeholders.
                    A
                •		 	 s	of	31	March	2006,	the	Minister	of	Human	
                    Settlements	and	Members	of	the	Executive	                                           6.5 Subsidy inspection
                    Committee	(MinMec)	approved	that	subsidy	projects	                                  	      	 he	NHBRC	also	embarked	on	a	strategy	to	ensure	that	
                                                                                                               T
                    will be subject to a two-phase enrolment process                                           all	subsidy	housing	units	constructed	in	South	Africa	
                    in	order	for	the	NHBRC	to	achieve	the	required	risk	                                       were	inspected	by	the	NHBRC,	in	order	to	mitigate	the	
                    management	before	a	home	enrolment	certificate	is	                                         risk	of	possible	future	rectification	by	government.	Table	
                    issued. These phases are project enrolment and home                                        10	shows	the	number	of	inspections	conducted	in	the	
                    enrolment.                                                                                 subsidy sector in the year under review.


                                                                                                                                                     NHBRC ANNuAl REpORT 2011/2012   41
42   NHBRC ANNuAl REpORT 2011/2012
            A	total	of	290	826	inspections	were	conducted	on	                 Table 11: Summary of houses assessed (not enrolled)
            156	134	houses.	It	should	be	noted	that	the	number	of	                Item                     Number of units        Number of units
            inspections was dependent on the speed of construction.                                       in KwaZulu-Natal         in Eastern Cape
            Most	of	the	houses	shown	in	Table	10	are	still	under	
                                                                                  Units to be                          25	093                  46	052
            construction;	on	completion,	a	minimum	of	four	
                                                                                  demolished
            inspections would have been done per house.
                                                                                  Units to be                          29	202                    7	340
                                                                                  rectified
Table 10: The number of subsidy inspections conducted
                                                                                  Vacant	stands                         6	555                      331
    Province                               Homes            Number of             Sub-total                            60	850                  53	723
                                        inspected          inspections            Units requiring no                    3 168                       45
                                                            conducted             rectification
    Eastern	Cape                         					15	465	        							20	832	       Total number of                      64 018                  53 768
                                                                                  units assessed
    Free	State                              39 288           							44	574	
    Gauteng                              					10	442	        							15	668	   8. Training of home builders
    KwaZulu-Natal                           28 687                83 297
    Limpopo                                 24 384           							56	823	   8.1 Strategic context:
    Mpumalanga                           					12	582	        							19	820	   	       	 ection	3	of	the	Act	requires	that	the	Council	assists	
                                                                                      S
    Northern	Cape                         						3	651	             8 132              home builders, through training and inspection, to
                                                                                      achieve and maintain satisfactory technical standards of
    North	West                                8 138          							14	541	
                                                                                      home building.
    Western	Cape                             13 497               27 139
                                                                              8.2 Key activities:
    Total                                			156	134	         					290	826	
                                                                                          T
                                                                                      •		 	 he	NHBRC	identifies	home	builders	through	its	
                                                                                          partnerships with provincial departments and
                                                                                          municipalities.
7.	 Rectification	of	unenrolled	houses                                                •		 Learners are trained on-site in a number of trades in
                                                                                          the home building industry.
7.1 Strategic context:
	           S
            	 ection	5(5)	of	the	Act	empowers	the	Council	to	
                                                                              8.3 Performance:
            engage	in	undertakings	to	improve	ethical	and	technical	
            standards in the home building industry, and engage in                    The total number of emerging builders trained for the
            undertakings	to	promote	the	improved	structural	quality	                  review	period	amounted	to	651.	The	target	in	2012/2013	
            of	homes	constructed	in	South	Africa.                                     is	3500	emerging	home	builders	to	be	trained	across	all	
                                                                                      provinces.
7.2 Key activities:
                                                                                      8.3.1       Emerging Home Builder Training (EHBT)
                T
            •		 	 he	NHBRC	was	appointed	by	the	KwaZulu-
                Natal	and	Eastern	Cape	Departments	of	Human	                  	       	       	   A
                                                                                                  	 	total	of	609	learners	were	trained,	as	presented	
                Settlements	to	assess	the	structural	condition	of	                                in Table 12. The major focal point of Emerging
                houses	that	were	built	and	not	enrolled	by	NHBRC.	                                Home	Builder	Training	was	KwaZulu-Natal,	as	a	
                This	project	was	a	pilot	rectification	project	initiated	                         major	rectification	programme	was	implemented	
                by	the	National	Department	of	Human	Settlements.                                  in that province.
                M
            •		 	 ost	of	the	houses	were	either	built	prior	to	2002	or	               8.3.2       Youth in Human Settlements (YiHS) and
                were	built	as	part	of	Peoples	Housing	Process	(PHP)	                              Youth Build programmes
                projects or were rural houses.                                	       	       	   	 	 	 he	YiHS	was	implemented	at	Mount	
                                                                                                  - T
7.3 Performance:                                                                                      Pleasant,	Eastern	Cape.	A	total	of	96	youths	
                                                                                                      were	trained	in	bricklaying	and	plastering,	of	
            •	 A provisional summary of the houses assessed is
                                                                                                      which 28 were female.
               presented	in	Table	11.	The	general	findings	indicated	
               that	most	of	the	houses	did	not	comply	with	National	          	       	       	   -	 	n	Limpopo,	as	part	of	Youth	Month	
                                                                                                     I
               Building	Regulations.                                                                 celebrations	in	June	2011,	94	youths	were	
                                                                                                     trained	in	a	CETA-accredited	construction	
               T
            •	 	 he	NHBRC	has	engaged	with	all	provinces	in	order	
                                                                                                     health and safety course as part of the Youth
               to ensure that all houses are enrolled in the future, so
                                                                                                     Build	programme.	The	Youth	Build	concept	
               as	to	avoid	future	rectification.
                                                                                                     fosters a spirit of voluntarism, so it was


                                                                                                                            NHBRC ANNuAl REpORT 2011/2012   43
                          gratifying that of the 94 youth volunteers, 71           Programme     Courses         Province   Males   Females    Total
                          were female.
                                                                                   4. Youth      Construction	   Limpopo    23      71         94
     	       	   	     -	 	t	is	envisaged	that	in	2012/2013,	the	YiHS	
                          I                                                        Build         health and
                          programme	will	be	implemented	in	six	                                  safety
                          provinces	with	1	040	youths	trained	in	various	          5.	Youth	     Bricklaying,	   Eastern    68      28         96
                          construction courses.                                    in	Human	     plastering      Cape
                                                                                   Settlements
             8.3.3. Women Build
                                                                                   TOTAL                                    592     359        951
                          T
                       •	 	 he	Free	State	was	chosen	to	host	the	2011	
                          Women	Build	programme	as	part	of	Women’s	
                          Month celebrations, with the training being          9.	 Contribution	to	Outcome	8
                          held	at	the	historic	Brandfort	Township.	            As	part	of	its	contribution	to	Outcome	8,	the	NHBRC:
                       • A total of 113 women were trained in                  •		     	 nsures compliance to national norms, standards and
                                                                                       E
                         bricklaying	and	plastering	by	accredited	                     quality within the home building sector.
                         NHBRC	registered	and	women-owned	                     •		     	 ssists the public and private sectors in improving
                                                                                       A
                         training providers.                                           programme and project management through training
             8.3.4     Community development programmes                                and	skills	transfers.
                       (including the Gauteng Disability Programme             •		     	 ssists in the protection of the interests of the public
                                                                                       A
                       and the Women Build programme)                                  within the human settlements sector.
     	       	   	        I
                       -	 	n	Gauteng,	a	ground-breaking	training	              •		     	 ssists government in the development of appropriate
                                                                                       A
                          programme aimed at people living with                        norms and standards in the provision of services,
                          disabilities	was	launched.	The	Gauteng	                      infrastructure and housing.
                          Provincial	Department	of	Housing	and	Local	
                          Government	in	partnership	with	the	NHBRC	            •		     A
                                                                                       	 ssists	the	National	Department	of	Human	Settlements	in	
                          piloted	the	Gauteng	Disability	Programme	                    the improvement of governance and performance in the
                          in	December	2011.	A	total	of	10	emerging	                    sector.
                          contractors living with disabilities were            To assist government in providing services and infrastructure to
                          identified	for	the	training.	Given	the	nature	       housing,	the	NHBRC	assisted	the	KwaZulu-Natal	Department	
                          of some of the contractors’ disabilities, they       of	Human	Settlements	with	a	rainwater	harvesting	project.	
                          were	allowed	to	nominate	proxy	learners,	            Approximately	8	000	water	tanks	were	provided	to	the	
                          as the training programme covered both               housing units in question, mainly in the rural areas, with the
                          managerial and technical development.                NHBRC	ensuring	that	the	structural	integrity	of	these	homes	
                          In	total	18	learners	were	trained.	The	              was not compromised in the process.
                          management courses covered construction
                          management and project management, while
                          the	technical	courses	focused	on	bricklaying	        ENFORCEMENT	AND	COMPLIANCE
                          and plastering.
     	       	   	     -	 	n	Buffalo	City,	Eastern	Cape,	a	community	
                          I                                                    The	Enforcement	and	Compliance	Division’s	goal	is	to	provide	
                          development	programme	aimed	specifically	            cutting-edge	 legal	 advisory	 services	 to	 ensure	 efficient	 and	
                          at	women	was	implemented	in	April	2011.	In	          effective regulation of the home building industry as well as the
                          total,	21	women	were	trained	in	bricklaying	         protection of housing consumers’ rights.
                          and plastering.
                                                                               The division’s main service offerings entail:
     	       	   	        I
                       -	 	n	2012/2013,	the	NHBRC	will	continue	to	be	
                          relevant in development programmes that add          •		     E
                                                                                       	 nsuring compliance with applicable legislative and
                          value and restore dignity to local communities.              regulatory	frameworks,	including	relevant	policies.
                                                                               •		     F
                                                                                       	 acilitating successful enforcement of the Act through
     Table 12: Emerging home builders trained                                          the prosecution of defaulters.
                                                                               •		     I
                                                                                       	nitiating	and/or	defending	civil	and/or	criminal	litigation	
         Programme      Courses         Province     Males   Females   Total
                                                                                       processes	for	or	against	the	NHBRC,	including	recoveries	
         1. Emerging    Bricklaying,	   KwaZulu-     486     123       609             and	alternative	dispute	resolution	(ADR).
         Home	          plastering      Natal
         Builder	                                                              •		     P
                                                                                       	 roviding	innovative	legal	advisory	services,	including	
         Training                                                                      legislative reviews.
         2.	Gauteng	    Bricklaying,	   Gauteng      15      3         18      •		     	 eveloping and implementing a functional contract
                                                                                       D
         Disability     construction                                                   management system.
         Programme      management,
                        project
                        management,                                            1.	 Prosecution	of	home	builders
                        plastering

         3.	Women	      Bricklaying,	   Free	State   0       113       134     1.1 Strategic context:
         Build          plastering
                                        Eastern              21                	       	n	terms	of	Section	11(3)	of	the	Act,	Council	may	
                                                                                       I
                                        Cape                                           suspend the registered home builder’s registration or



44   NHBRC ANNuAl REpORT 2011/2012
Table 15: Disciplinary hearings held in the financial year

 Provinces                No. of DC   No. of builders      No. of builders          No. of         No. of        No. of            No. of
                           hearings     found guilty            found not          matters       verdicts       matters          matters
                                                                    guilty         settled   outstanding     withdrawn         postponed

 Gauteng                         23                    7                4               7                1             4                 0

 Limpopo                          5                    3                0               1                0             1                 0

 Mpumalanga                       8                    6                0               0                0             2                 0

 North	West                      13                10                   1               0                2             0                 0

 Western	Cape                    38                20                   2               7                1             6                 2

 TOTAL                           87                46                   7              15                4           13                  2




       refuse	to	enrol	homes	for	the	period	that	the	Council	            1.3 Performance
       deems necessary to investigate the matter or until the                During the year under review, disciplinary hearings
       registered home builder has complied with the relevant                against	home	builders	were	held	in	Gauteng,	Western	
       provisions, condition or obligation in terms of the Act.              Cape,	Limpopo,	Mpumalanga	and	North	West,	as	
       In	addition,	the	Act	empowers	the	NHBRC’s	Disciplinary	               presented	in	Table	15.
       Committee,	after	following	due	process,	to	impose	
                                                                         	   	n	the	year	under	review,	a	total	of	87	matters	were	
                                                                             I
       withdrawal	of	registration	of	a	home	builder,	a	fine	not	
                                                                             adjudicated	upon	by	the	NHBRC’s	Disciplinary	Committee,	
       exceeding	R25	000	or	a	warning	in	instances	where	a	
                                                                             where offences included failure to rectify major
       home builder has been found guilty of contravening the
                                                                             structural	defects;	failure	to	rectify	workmanship	related	
       provisions of the Act.
                                                                             problems;	failure	to	enrol	homes	and	failure	to	attend	to	
1.2 Key activities:                                                          correspondence	from	the	NHBRC.	Of	the	total	number	
       The disciplinary prosecution process entails:                         of	matters	prosecuted,	53%	resulted	in	guilty	verdicts.	
       •		 	 eviewing	files	to	ensure	that	the	enforcement	
           R                                                                 The	turnaround	time	in	respect	of	the	finalisation	of	
           procedural and substantive requirements were                      prosecution	matters	was	reduced	from	three	years	to	180	
           complied with before deciding whether or not to                   days, and there was an improvement in the payment of
           prosecute a home builder.                                         fines	by	defaulting	home	builders.	Figure	10	summarises	
                                                                             the outcome of the disciplinary matters.
           S
       •		 	 ending	a	30	days’	notice	of	intention	to	prosecute	
           a home builder, which affords the home builder an
           opportunity to respond to the allegations against them.       2.	 Criminal	enforcement
           I
       •		 	ssuing	summons	instructing	a	home	builder	to	
           appear	before	the	NHBRC’s	Disciplinary	Committee.             2.1 Strategic context:
       •		 Disciplinary hearing proceedings.                             	   S
                                                                             	 ection	21	of	the	Act	makes	it	a	criminal	offence	for	any	
       •		 Implementing	disciplinary	committee	rulings.                      person to build a home without being registered as a
                                                                             home builder or without enrolling such home with the



Figure 10: Outcome of prosecutions of home builders

  50
                  46
  45
  40
  35
  30
  25
  20
                                                            15
  15                                                                                                13
  10                                   7
                                                                               4
   5                                                                                                                       2
   0
                Guilty	           Not	Guilty	              Settled	      Awaiting	Verdict	      Withdrawn	       Postponement	



                                                                                                                NHBRC ANNuAl REpORT 2011/2012   45
           NHBRC.	The	penalty,	upon	conviction,	is	a	fine	of	up	to	         3.2 Key activities
           R25	000	per	contravention	or	imprisonment	for	a	period	               The drafting of the bill involved the following processes:
           not	exceeding	one	year	on	each	charge.
                                                                                 •		 Consultation	with	the	NHBRC’s	internal	stakeholders.
     2.2 Key activities:
                                                                                 •		 Research	on	industry	best	practices.
     	     T
           	 he	criminal	enforcement	process	involves	working	in	                    C
                                                                                 •		 	 onsultation	with	the	Department	of	Human	
           collaboration with law enforcement agencies in the                        Settlements.
           investigation and prosecution of statutory offences, as
                                                                                •		 Consultation	with	industry	stakeholders.
           per	Section	21	of	the	Act.
                                                                                    V
                                                                                •		 	 arious	engagements	between	the	drafters	and	
     2.3 Performance:                                                               technical	experts.
     	     	n	an	effort	to	maximise	the	efficient	enforcement	of	the	
           I                                                                    •		 Drafting of the bill.
           provisions	of	Section	21,	the	NHBRC:                                     C
                                                                                •		 	 ouncil’s	Legislative	Review	Steering	Committee	
           •		 	 orged	collaborative	efforts	with	relevant	stakeholders,	
               F                                                                    approval process.
               including government institutions and law enforcement            •		 Council	approval	process.
               agencies, in order to ensure that the rights of housing              S
                                                                                •		 	 ubmission	of	the	memorandum	and	the	bill	to	the	
               consumers were adequately protected.                                 minister.
               E
           •		 	 ngaged	with	the	Gauteng	Deputy	Director	of	Public	
               Prosecutions	to	explore	various	means	of	cooperation	        4.	 Contract	Management	
               in	the	criminal	prosecution	of	Section	21	offences.
               A
           •		 	 ssisted and cooperated with the special                    4.1 Strategic context:
               investigative	unit,	The	Hawks;	various	Commercial	
                                                                                 The objective of contract management is to ensure
               Crimes	Units	and	the	South	African	Police	Services	in	
                                                                                 that	the	NHBRC	enters	into	valid,	fair	and	value	added	
               their	investigations	of	offences	relating	to	Section	21	
                                                                                 contracts	that	protect	the	interests	of	the	NHBRC	in	the	
               of the Act.
                                                                                 procurement of goods or services.
                                                                            4.2 Performance:
         R
     3.	 	 epeal	of	the	Housing	Consumers	Protection	
                                                                                 During this period:
         Measures	Act	(Act	No.95	of	1998)
                                                                                     A
                                                                                 •		 	 total of 62 contracts for the provision of various
                                                                                     services	and/or	the	supply	of	goods	were	drafted.
     3.1 Strategic context:
                                                                                     A
                                                                                 •		 	 contract management policy was developed and
              T
           •	 	 he	NHBRC,	as	a	regulator,	has	an	obligation	to	
                                                                                     approved	by	the	NHBRC’s	Executive	Committee	and	
              constantly ensure that its legislative and regulatory
                                                                                     will	be	submitted	to	Council	for	approval	during	the	
              framework	remains	relevant	and	responsive	to	the	
                                                                                     first	quarter	of	2012.
              needs	of	the	people	it	is	designed	to	protect.	In	recent	
              years, the country has evidenced the promulgation
              of various pieces of legislation and a number of              5.	 Litigation
              changes in the social, economic, environmental and
              political arena that have contributed to the growing          5.1 Strategic context:
              and	changing	needs	and	expectations	of	housing	                    One of the inherent objectives of the division is to maintain
              consumers and the home building industry.                          a comprehensive litigation management programme in
               I
           •		 	t	was	on	this	basis	that	the	NHBRC	undertook	a	                  order	to	protect	the	interests	of	the	NHBRC	against	adverse	
               legislative review of the Act and proposed amendments             litigation and to reduce litigation fees and costs.
               that	will	provide	more	protection	to	housing	consumers;	     5.2 Key activities:
               strengthen	regulatory	efficacy;	and	introduce	effective	
                                                                                 Litigation management involves the following activities:
               enforcement tools and appropriate penalties to
               encourage compliance with the Act.                                    R
                                                                                 •		 	 eviewing	matters	to	decide	whether	to	institute,	
                                                                                     defend or settle a case.
               O
           •		 	 riginally,	the	intention	was	to	finalise	the	bill	
               –	entitled	the	Housing	Consumer	Protection	                           I
                                                                                 •		 	nstructing	and	briefing	external	legal	representatives	
               Bill	–	during	the	current	financial	year.	However,	                   to	act	on	behalf	of	the	NHBRC.
               Council	resolved	during	the	course	of	August	2011	                •		 Deposing	and	filing	necessary	court	documents.
               that there was a need to consult all the relevant                     M
                                                                                 •		 	 onitoring	and	reviewing	the	performance	of	external	
               industry	stakeholders.	As	a	result,	the	NHBRC	                        representatives to ensure prudent attendance to, and
               extended	the	deadline	in	order	to	afford	these	                       the	expeditious	finalisation	of,	cases.
               stakeholders	an	opportunity	to	provide	input	to	
                                                                                 •		 Attending	court	hearings/trials.
               the	bill.	This	process	was	only	finalised	during	
               December	2011.                                                    •		 Implementing	court	rulings.
           •		 	 he	bill	will	be	approved	by	the	NHBRC’s	Council	
               T                                                            5.3 Performance:
               during	April	2012	and	submitted	to	the	office	of	            	    	 uring	this	period	a	total	of	33	matters	were	dealt	with;	
                                                                                 D
               the minister immediately thereafter. The ministerial              12	of	these	matters	were	finalised,	with	most	of	the	
               process will culminate in the parliamentary process,              matters being dealt with internally, thereby reducing
               anticipated	to	commence	during	2012/13.                           litigation fees and costs.



46   NHBRC ANNuAl REpORT 2011/2012
NHBRC ANNuAl REpORT 2011/2012   47
     Table 13: Headcount and workforce profiles

      Occupational levels                                       Male                               Female                   Foreign nationals
                                      Grades      A        C           I        W            A    C            I     W      Male      Female        Total
      Top management                    1          1        0          0        0            0    0           0       0       0          0                  1

      Senior	management                3-4         1        0                   1            1    0           1       0       0          0                  4

      Middle management                5-6        15        1          2        6            4    0           1       1       0          0                  30
      Professionally	qualified	
      Skilled/	technical	qualified	    7-12       95       11          5        1           138   8           4      13       0          0             275
      /junior	management
      Skilled	and	discretionary	      13 - 15      2        0          0        0            4    0           0       0       0          0                  6
      decision	making
      Semi-skilled	and	defined	         17         0        0          0        0           10    0           0       0       0          0                  10
      decision-making
      TOTAL PERMANENT                            114       12          7        8           157   8           6      14       0          0             326




     CORPORATE	SERVICES                                                               (NEHAWU)	 and	 compliance	 with	 the	 provisions	 of	 the	 Labour	
                                                                                      Relations	 Act.	 Extensive	 communication	 strategies	 were	
                                                                                      employed	and	an	external	facilitator	engaged	to	expedite	the	
     Human	capital
                                                                                      consultative processes.
     A	 key	 strategic	 project	 during	 this	 year	 was	 the	 finalisation	
     of	 the	 organisational	 redesign	 process	 and	 the	 finalisation	 of	
     processes	in	terms	of	Section	189	of	the	Labour	Relations	Act,	                  Headcount	and	workforce	profiles
     1995.		                                                                          The	headcount	was	326	permanent	staff	as	at	31	March	2012,	
                                                                                      as shown in Table 13.
     A number of positions were realigned as part of these
     processes,	 with	 a	 strong	 focus	 on	 skills	 at	 the	 delivery	 end.	         Black	(African,	Coloured	and	Indian	ACI)	levels	remained	high	
     A major outcome was the reduction in the number of staff                         at	93%	against	a	national	demographic	of	90.8%.	White	levels	
     at	 head	 office	 and	 an	 increase	 in	 the	 number	 of	 staff	 at	 the	        reflected	7%	of	the	total	NHBRC	equity	complement	against	a	
     interface with clients. These changes required consultations                     national	demographic	of	9.2%.	A	focused	effort	was	made	to	
     with	the	National	Education	Health	and	Allied	Workers	Union	                     acquire	women	at	management	levels.	Post	implementation	of	




     Figure 9: Employment equity within the NHBRC



                                                       FEMALES                                                      MALES

          African          48%                                                        (157)       (114)                                      35%
                      Black 52%




                                                                                                                                                Black 41%




            Asian                                                                2%        (6)    (7)     2%




        Coloured                                                                 2%        (8)        (12)     4%




           White                                                           4%       (14)          (8)     3%



                                                                                    FEMALE            MALE
                                                                                      56%             44%
                                                                                      (185)           (141)


     Note:	The	numbers	shown	in	brackets	()	are	actual	head	counts.



48   NHBRC ANNuAl REpORT 2011/2012
this new organisational structure, people with disabilities will          Amendments to operational human capital
be actively targeted for designated posts. The emphasis for               policies
2012	is	to	expand	diversity	levels,	as	reflected	in	the	Council’s	
                                                                          All human capital policies and procedures were revised
Employment	Equity	Plan.
                                                                          and	reduced	to	a	manageable	policy	handbook	that	will	be	
                                                                          published	 in	 the	 new	 financial	 year	 and	 distributed	 to	 all	
Employment equity by gender                                               employees.	 This	 policy	 handbook	 provides	 a	 guideline	 and	
As	 at	 31	 March	 2012,	 there	 were	 141	 males	 (44%)	 and	 185	       framework	 for	 operational	 procedures	 in	 the	 expediting	 of	
females	(56%)	employed	by	the	NHBRC.	In	terms	of	race,	41%	               employee	duties	within	the	NHBRC,	and	will	form	part	of	the	
of	 the	 employee	 total	 reflected	 black	 males	 and	 52%	 black	       induction programme for all new employees.
females.
                                                                          Annual staff turnover
Employee equity by race                                                   A	 total	 of	 56	 new	 appointments	 were	 made	 against	 the	
The	NHBRC	had	326	employees	as	at	31	March	2012.	Of	these,	               approved organogram. The annual staff turnover was 31, as
83%	 were	 African,	 6%	 were	 Coloured,	 4%	 were	 Indian	 and	          illustrated in Table 14. A total of 11 staff requested voluntary
7%	 were	 White.	 There	 was	 an	 oversubscription	 in	 certain	          severance	packages	(VSPs)	due	to	changes	in	the	organisational	
areas	 and	 an	 under-subscription	 in	 the	 White	 and	 Coloured	        structure and the restructuring of jobs. There were 13 voluntary
categories. This will be corrected through targeted recruitment           resignations. The organisational change process is now
processes in the future.                                                  complete and will be embedded in all future change efforts in
                                                                          optimising	the	NHBRC	into	a	high-performance	organisation.



Table 14: Appointments and terminations within the NHBRC

             APPOINTMENTS          TERMINATIONS                                           Other

 Quarter     Appointments          Voluntary	       Dismissals        Retirement          Death in service   VSPs             Termination of
                                   Resignation                                                                                contracts
 Q1          9                     3                0                 0                   0                  4                0

 Q2          26                    6                1                 1                   1                  4                1

 Q3          10                    3                0                 0                   0                  2                2

 Q4          11                    1                0                 0                   1                  1                0

             56                    13               1                 1                   2                  11               3




                                                                                                                    NHBRC ANNuAl REpORT 2011/2012   49
     BUSINESS	MANAGEMENT	                                                       MARKETING	AND	
     SOLUTION                                                                   COMMUNICATION	
     During	 the	 year	 under	 review,	 the	 Information	 Technology	           During	 the	 year	 under	 review,	 a	 number	 of	 marketing	 and	
     Division	 made	 significant	 progress.	 In	 this	 financial	 year,	 90%	   communication activities were implemented nationally to
     of	 issues	 raised	 in	 the	 Deloitte	 Audit	 Report	 were	 addressed,	    promote	and	create	awareness	of	the	NHBRC.	
     with the remaining issues being addressed through projects
     still	 underway.	 Based	 on	 the	 report,	 a	 continuous	 business	        These are summarised as follows:
     improvement	 programme	 was	 initiated	 to	 address	 significant	          •		   	 uring	April	2011,	a	16-page	advertorial	supplement	
                                                                                      D
     changes in the business requirements.                                            was	developed	to	inform	and	educate	NHBRC	customers	
                                                                                      and	stakeholders	about	the	NHBRC’s	mandate.	A	total	
     To	this	end,	a	number	of	significant	projects	were	embarked	                     of	364	000	copies	were	distributed	through	City	Press	
     on:                                                                              (244	000),	Beeld	(115	000)	and	all	NHBRC	provincial	
     •		   	 	tender	was	issued	in	the	third	quarter	of	2011,	
           A                                                                          customer service centres.
           evaluated	responses	submitted	and	Council	resolution	                •		   	 	major	milestone	for	the	NHBRC	in	2011	was	being	the	
                                                                                      A
           obtained to procure an integrated enterprise resource                      proud	host,	in	partnership	with	the	National	Department	
           planning	(ERP)	solution	and	deployment	partner	to	                         of	Human	Settlements,	of	the	2011	International	
           implement the solution. The deployment of the solution                     Housing	and	Home	Warranty	Conference	(IHHWC),	held	
           is	scheduled	to	go	live	in	2013/14.                                        from	25-28	September	2011	in	Cape	Town.	It	was	the	
     •		   	 he	Information	Technology	Department	was	
           T                                                                          first	time	this	prestigious	conference	was	hosted	in	Africa	
           restructured;	the	process	of	transforming	it	into	a	                       in	its	30-year	history.	The	NHBRC	was	responsible	for	
           Business	Management	Solutions	Department	–	focused	                        conference	marketing	and	logistics,	as	well	as	reviewing	
           on	supporting	the	NHBRC	and	external	stakeholders	in	a	                    the conference papers. The conference, which drew close
           more	business	oriented	manner	–	is	currently	underway.                     on	300	prominent	speakers	and	delegates	from	across	
     •		   T
           	 he	process	of	significantly	upgrading	the	data	and	voice	                the	globe,	entailed	an	action-packed	mix	of	sessions	and	
           networks	to	ensure	quality	connectivity	is	also	still	in	                  seminars;	a	housing	project	tour;	charity	golf	day	and	
           progress.                                                                  three	networking	events.	The	conference	garnered	a	high	
                                                                                      level of national and local media interest.
     •		   	 project is currently underway to centralise and improve
           A
           the	email	and	internet	facilities	for	the	NHBRC	and	                 •		   	 s	part	of	IHHWC,	the	NHBRC	–	in	association	with	its	
                                                                                      A
           its	external	stakeholders.	The	project	is	scheduled	for	                   industry	partners	–	developed	the	Legacy	Project,	an	
           completion	in	2012/13.                                                     initiative to build eight housing units using alternative
                                                                                      building	technologies	in	a	low-income	village	in	Blue	
     •		   	 he	PABX	facilities	are	also	being	reviewed	from	a	
           T
                                                                                      Downs,	Cape	Town.	The	project	was	launched	on	
           centralisation perspective in order to enhance both
                                                                                      Mandela	Day	by	the	Minister	of	Human	Settlements,	
           internal	and	external	stakeholder	support.	
                                                                                      with	the	handover	ceremony	taking	place	during	the	
     •		   	 nother project is underway to upgrade the technology
           A                                                                          proceedings	of	the	IHHWC.
           facilities	at	all	NHBRC	provincial	offices.	
                                                                                •		   	 	new	NHBRC	website	was	launched	in	December	
                                                                                      A
     •		   	 he	Public	Call	and	Contact	Centre	project	was	initiated	
           T                                                                          2011,	creating	a	platform	for	the	NHBRC	to	engage	its	
           this	year,	and	is	scheduled	for	completion	in	the	next	                    stakeholders	and	customers	by	providing	updated	and	
           financial	year.                                                            relevant information.
                                                                                •		   	 o	increase	visibility	of	the	NHBRC,	especially	with	
                                                                                      T
     While	these	are	very	significant	projects,	the	most	important	by	                regards to its involvement in subsidy projects, the
     far	is	deploying	an	integrated	solution	that	will	allow	external	                Marketing	and	Communications	section	embarked	on	a	
     stakeholders	to	communicate	directly,	online,	into	the	NHBRC’s	                  campaign to erect billboard signage on enrolled projects
     systems. This will allow:                                                        throughout	South	Africa.
            T
     •		 	 he	Department	of	Human	Settlements	and	
                                                                                •		   T
                                                                                      	 he	NHBRC	continued	to	participate	in	provincial	
            municipalities to instantly register and communicate
                                                                                      exhibitions	and	roadshows	during	the	year	to	ensure	
            subsidised housing schemes.
                                                                                      increased awareness and education of its role, most
     •		   	 ome	builders	to	register	and	enrol	online.
           H                                                                          notably among housing consumers and home builders.
     •		   B
           	 anks	to	obtain	information	online.                                       Provincial	exhibitions	and	roadshows	are	frequently	
     •		   P
           	 rofessional	organisations	to	directly	communicate	with	                  undertaken	in	conjunction	with	the	national	and	
           each other.                                                                provincial	Departments	of	Human	Settlements.
                                                                                •		   	 s	part	of	the	NHBRC’s	strategy	to	be	more	accessible	
                                                                                      A
     The	roll	out	of	this	project	is	anticipated	to	begin	in	2013/14.	In	             to	its	customers,	the	Marketing	and	Communications	
     instances where home builders and homeowners do not have                         Department	supported	the	Limpopo	NHBRC	Provincial	
     access to online facilities, public facilities will be provided in               Customer	Service	Centre		with	the	launch	of	a	new	
     various contact support centres. The new technology will be                      service point at the Thulamela Municipality in the
     deployed with much greater effort, and render major cost- and                    Vhembe	district.
     time-saving	benefits	to	the	NHBRC	and	its	business	partners.		             •		   T
                                                                                      	 he department also initiated the process of procuring




50   NHBRC ANNuAl REpORT 2011/2012
      a	creative	agency	to	assist	the	NHBRC	with	a	range	of	              •		     P
                                                                                  	 romotion	of	Access	to	Information	Act	(Act	No.2	of	
      branding	and	marketing	toolkits;	corporate	identity	                        2000).
      manual;	and	aids	and	materials	to	position	the	NHBRC	               •		     P
                                                                                  	 revention	and	Combating	of	Corrupt	Activities	Act	(Act	
      as a world-class regulator and protector of housing                         No.12	of	2004).
      consumer rights.
                                                                          The	 NHBRC	 serves	 to	 ensure	 compliance	 with	 the	 approved	
SUPPLY	CHAIN                                                              Preferential	 Procurement	 Policy,	 the	 Preferential	 Procurement	
                                                                          Policy	 Framework	 Act	 and	 the	 Broad-Based	 Black	 Economic	
                                                                          Empowerment Act.
The	NHBRC	remains	committed	in	its	endeavours	to	empower	
historically disadvantaged individuals, as it posts another report
                                                                          Table 16 shows the actual value of purchases placed with
on	its	preferential	procurement	spend	of	93.5%	against	a	51%	
                                                                          suppliers with shareholdings by historically disadvantaged
target.	 This	 reflects	 an	 annual	 performance	 of	 42.5%	 above	
                                                                          individuals	(HDIs).
target. The cost of doing business remains a challenge in every
entity, as the prices of all commodities and inflation continue
                                                                          Table 16: Procurement spend for the year under review
to	 rise.	 However,	 the	 socio-economical	 objective	 of	 achieving	
targeted preferential procurement goals remains a daily                       Procurement	spend:	HDI	        R180	298	059                93.5%
operational	 priority	 within	 the	 NHBRC’s	 supply	 chain,	 while	 at	       institutions
the same time ensuring that the quality of goods and services is              Procurement	spend:	non-HDI	      R12	587	004                6.5%
not compromised.                                                              institutions
                                                                              Total procurement spend        R192 885 063                 100%
The following legislative acts govern the supply chain activities
of	the	NHBRC	and,	as	the	pillars	of	regulatory	compliance,	are	
                                                                          Of	 the	 R192	 885	 063	 spent	 on	 procurement	 for	 the	 year,	
taken	into	account	in	daily	procurement	operations:
                                                                          R180	298	059	was	through	HDI	institutions,	representing	93.5%	
     C
•		 	 onstitution	of	the	Republic	of	South	Africa	(Act	No.108	
                                                                          of	the	total	expenditure.	The	figures	shown	in	Table	16	are	an	
     of	1996).
                                                                          indication	 of	 the	 NHBRC’s	 efforts	 to	 ensure	 that	 it	 meets	 the	
•		   P
      	 ublic	Finance	Management	Act	(Act	No.1	of	1999)	(as	              targets set in contributing to the empowerment of historically
      amended).                                                           disadvantaged individuals.
•		   	 ousing	Consumers	Protection	Measures	Act	(Act	No.95	
      H
      of	1998).                                                           The	 R180m	 spent	 on	 HDI	 included	 provision	 for	 the	 following	
•		   B
      	 road-Based	Black	Economic	Empowerment	Act	(Act	                   services:
      No.53	of	2003)	and	Codes	of	Good	Practices.                         •				Inspection	of	houses
•		   P
      	 referential	Procurement	Policy	Framework	Act	(Act	No.5	           •     Forensic engineering investigations
      of	2000).                                                           •     Actuarial evaluations
•		   P
      	 romotion	of	Just	Administration	Act	(Act	No.3	of	2000).           •			Water	tanks	
•		   Protected	Disclosures	Act	(Act	No.26	of	2000).                      •			Geotechnical	services.




                                                                                                                      NHBRC ANNuAl REpORT 2011/2012   51
     PERFORMANCE	INFORMATION	FOR	THE	2011/2012	FINANCIAL	YEAR
     Financial perspective

     Strategic objective:	To	grow,	protect	and	sustain	the	NHBRC	Warranty	Fund

      KPA                KPA budget   KPI   KPI               Key activities      Yearly targets    Target    Actual               Reason for
                         allocation   No.                                                           met/not   achievement          variation
                                                                                                    met

      1.	Revenues        R86.5m       1.1   R264.2m	to	be	    •		 eview	and	
                                                                R                 R264.2m	to	be	    Target    A total of
                                            collected from      revise	NHBRC	     collected from    met       R279	million	was	
                                            non-subsidy         product           non-subsidy                 collected from
                                            enrolments          pricing model     enrolments                  non-subsidy
                                                              •	Diversify                                     enrolments
                                                                NHBRC	
                                      1.2   R10.7m	to	be	       product           R10.7m	to	be	     Target    A total of
                                            collected from      and service       collected from    met       R12.1	million	was	
                                            registrations &     offerings         registrations &             collected from
                                            renewals                              renewals                    registrations &
                                                              •	Develop                                       renewals
                                                                NHBRC	
                                                                sustainability
                                      1.3   R159m	to	                             R159m	to	         Target    A total of
                                                                model
                                            be collected                          be collected      met       R191	million	
                                            from subsidy        R
                                                              •		 educe	          from subsidy                was collected
                                            enrolments          operational       enrolments                  from subsidy
                                                                costs                                         enrolments
                                                                I
                                                              •		mprove	
                                      1.4   R16m	to	be	         customer          R16m	to	be	       Target    A total of
                                            collected from      service levels    collected from    met       R184	million	was	
                                            technical         •	Diversify         technical                   collected from
                                            services            incentives        services                    technical services
                                                                and monitor
                                      1.5   R72m	to	be	         investment        R72m	to	be	       Target    A total of
                                            collected from      advisors          collected from    met       R204	million	was	
                                            NHBRC	debtors       I
                                                              •		ncrease	         NHBRC	debtors               collected from
                                                                debtors                                       debtors
                                                                collection days
      2.		 arranty	
         W               R6.6m        2.1   8%	return	on	                         8%	return	on	     Target    6.2%	achieved		      Market	did	
         fund                               investment to       M
                                                              •		 arket	and	      investment to     not met   (R197.3	million)     not perform
                                            be achieved         brand	NHBRC       be achieved                                      well.	Returns	
                                            (R3	billion)        I
                                                              •		mplement	        (R256	million)                                   lower	by	5%	
                                                                the	risk-based	                                                    in the equity
                                                                insurance                                                          portfolio and
                                                                strategy                                                           1.2%	lower	
                                                                                                                                   in the bond
                                                                                                                                   portfolio.




52   NHBRC ANNuAl REpORT 2011/2012
Customer	perspective

Strategic objective: To provide innovative quality products and services that satisfy the customer.

 KPA                 KPA          KPI   KPI                 Key activities      Yearly    Target    Actual                  Reason for
                     budget       No.                                           targets   met /     achievement             variation
                     allocation                                                           not
                                                                                          met

    H
 1.		 ome	           R86.5m       1.1   33	170	housing	     •		mprove	
                                                              I                 33	170    Target    A total of 37 671
    enrolments                          units to be           operations                  met       housing units were
                                        enrolled in the       quality service                       enrolled in the non-
                                        non-subsidy           levels                                subsidy sector
                                        sector	within	15	   •	Diversify
                                        days                  and improve
                                  1.2   210	100	home	         NHBRC	            210	100   Target    A total of 217 428
                                        & project             product                     met       applications for
                                        enrolments to be      and service                           home and project
                                        enrolled in the       offerings                             enrolments were
                                        subsidy sector      •		 arket	the	
                                                              M                                     received for the
                                        within	15	days        NHBRC	brand                           year, however
                                                            •		 uild	the	
                                                              B                                     43 119 did not
                                                              capacity of                           meet technical
                                                              NHBRC	service	                        requirements, and
                                                              centres                               therefore	174	309	
                                                                                                    units were enrolled
                                                              E
                                                            •		 xpand	
    H
 2.		 ome	builder	                2.1   12	000	home	          housing           12	000    Target    A total of 12
    registration                        builders to           consumer                    met       092	applications	
                                        renew their           education                             for renewal of
                                        registration          initiatives                           membership were
                                        within 1 day                                                received, however
                                                              R
                                                            •		 esearch	
                                                                                                    872 did not meet
                                                              and respond
                                                                                                    the qualifying
                                                              to		NHBRC	
                                                                                                    criteria. Therefore,
                                                              stakeholder	
                                                                                                    a	total	of	11	220	
                                                              needs and
                                                                                                    home builders
                                                              issues
                                                                                                    renewed their
                                                            •	Monitor                               membership
                                                              customer
                                  2.2   3 337 new home        satisfaction      3 337     Target    A	total	of	3	557	
                                        builders to be        levels                      met       applications
                                        registered within                                           for renewal of
                                        5	days	                                                     membership were
                                                                                                    received, however
                                                                                                    871 did not meet
                                                                                                    the qualifying
                                                                                                    criteria. Therefore,
                                                                                                    a total of 2 844
                                                                                                    new home builders
                                                                                                    registered
    C
 3.		 onsumer	       R2.2m        3.1   80%	of	                                 80%       Target    90%	of	home	
    education                           registered home                                   met       builders were
                                        builders to                                                 inducted
                                        receive	NHBRC	
                                        induction
                                  3.2   70%	of		housing	                        70%       Target    No	housing	             Database
                                        consumers                                         not met   consumers were          of housing
                                        whose homes are                                             inducted in the         consumers is not
                                        enrolled & under                                            non-subsidy sector,     available
                                        construction to                                             however housing
                                        be inducted                                                 consumer education
                                                                                                    was conducted in
                                                                                                    the subsidy sector
                                  3.3   Two sessions per                        8         Target    10	sessions	were	
                                        quarter to be                                     met       held	with	NHBRC	
                                        held	with	NHBRC	                                            stakeholders	in	
                                        stakeholders                                                the	Western	Cape,	
                                                                                                    Mpumalanga,
                                                                                                    Eastern	Cape,	
                                                                                                    Gauteng,	Limpopo	
                                                                                                    and	KwaZulu-Natal




                                                                                                                    NHBRC ANNuAl REpORT 2011/2012   53
      KPA                   KPA          KPI   KPI                  Key activities       Yearly     Target    Actual                   Reason for
                            budget       No.                                             targets    met /     achievement              variation
                            allocation                                                              not
                                                                                                    met

      4. Legal services     R8.5m        4.1   Reduce	the	          •		mplement	
                                                                      I                  7 days     Target    Legal opinions
                                               number of              revised Act                   met       were done within 7
                                               days	taken	to	       •		mprove	legal	
                                                                      I                                       working	days
                                               produce legally        service delivery
                                               enforceable            capacity
                                               opinion from
                                               6	weeks	to	7	
                                               working	days

                                         4.2   Reduce	the	                               7 days     Target    Legal contracts
                                               number of                                            met       were done within 7
                                               days	taken	to	                                                 working	days
                                               produce legally
                                               enforceable
                                               contracts from 3
                                               weeks	to	7days

                                         4.3   Reduce	the	                               180	days   Target    Prosecutions	were	
                                               number of                                            met       done	within	180	
                                               days	taken	                                                    days
                                               to prosecute
                                               from date of
                                               suspension from
                                               3	years	to	180	
                                               days

                                         4.4   At	least	200	                             200        Target    Only	106	                Only	106	
                                               stakeholders	                                        not met   stakeholders	were	       stakeholders	were	
                                               to be reached                                                  reached through          reached through
                                               through legal                                                  legal education          legal education
                                               education                                                                               due	to	lack	of	
                                                                                                                                       capacity

                                         4.5   70%	completion	                           70%        Target    100%	of	the	draft	
                                               of legislative                                       met       bill completed
                                               reviews

                                         4.6   100%	                                     100%       Target    The regulations          The bill is to be
                                               completion of                                        not met   process is still to be   finalised	prior	
                                               regulations                                                    undertaken               to initiating
                                                                                                                                       the regulations
                                                                                                                                       process. The
                                                                                                                                       provisions in the
                                                                                                                                       regulations must
                                                                                                                                       be influenced by
                                                                                                                                       the Act

         H
      5.		 ome	builder	     R15m	        5.1   100%	                •	Develop            100%       Target    Eric	Molobi	Centre	      Training facilities
         training and                          accreditation of       and design                    not met   was not accredited       are still under
         development                           the Eric Molobi        best practice                                                    development
                                               Centre	for	            home builder
                                               Occupational           training
                                               Excellence		to	be	     materials
                                               achieved               I
                                                                    •		dentify	and	
                                                                      recruit trainees
                                         5.2   At least 4                                4          Target    Workshops	were	
                                               inspector training     C
                                                                    •		 onduct	                     met       held	in	KwaZulu-
                                               events to be           NHBRC	                                  Natal	and	
                                               undertaken	            home builder                            Mpumalanga
                                                                      training
                                         5.3   At	least	3	500	      •	Monitor and        3	500      Target    A	total	of	951	          Strategy	of	
                                               emerging home          track	NHBRC	                  not met   home builders were       training was
                                               builders to            graduate                                trained                  changed to
                                               undergo training       development                                                      identify learners
                                               in various home                                                                         who are currently
                                                                      P
                                                                    •		 rovide	
                                               building	skills                                                                         working	on	
                                                                      business
                                                                                                                                       projects in the
                                                                      opportunities
                                                                                                                                       subsidy	market
                                                                      for	NHBRC	
                                                                      graduates




54   NHBRC ANNuAl REpORT 2011/2012
KPA                  KPA          KPI   KPI                 Key activities     Yearly    Target    Actual                 Reason for
                     budget       No.                                          targets   met /     achievement            variation
                     allocation                                                          not
                                                                                         met

   M
6.		 arketing	and	   R10.8m	      6.1   100%	marketing	     •	Develop          100%      Target    Marketing	strategy	
   branding                             and branding          NHBRC	                     met       was developed and
                                        strategy to be        marketing	                           completed
                                        completed             and branding
                                                              strategy and
                                  6.2   4 advertorials to     specification    4         Target    14	advertorials/	
                                        be	undertaken	                                   met       adverts were
                                                            •	Develop
                                        in relevant                                                undertaken
                                                              tender
                                        publications
                                                              specification	
                                                              for a
                                  6.3   50%	                  marketing	       50%       Target    No	survey	             Management
                                        improvement           and branding               not met   conducted              decided to
                                        in	NHBRC	             agency                                                      conduct the
                                        perception by the                                                                 perception survey
                                        public              •	Appoint a                                                   every second year
                                                              marketing	
                                  6.4   Successful	IHHW	      agency and       1         Target    Conference	held	in	
                                        conference to be      implement                  met       Cape	Town	from	
                                        implemented           marketing	                           24-28	September	
                                                              strategy                             2011
                                                            •	Monitor brand
                                                              value as a
                                  6.5   At least 4                             4         Target    24	housing	expos	
                                                              function of
                                        housing	expos	to	                                met       were held
                                                              the	marketing	
                                        be held
                                                              and branding
                                  6.6   Annual	NHBRC	         strategy         1         Target    No	NHBRC	              No	conference	
                                        stakeholder		                                    not met   stakeholder	           was planned due
                                        conference to be                                           conference was         to	the	IHHWC,	
                                        held                                                       held                   which	the	NHBRC	
                                                                                                                          hosted

7. Quality           R135m        7.1   100%	of	houses	     •	Develop        100%        Target    100%	of	enrolled	
   assurance                            to be audited by      NHBRC	quality	             met       houses under
                                        internal quality      assurance plan                       construction were
                                        assurance           •		nstitute	
                                                              I                                    inspected
                                                              quality
                                  7.2   20%	of	all	           assurance plan   20%       Target    20%	of	inspected	
                                        inspected                                        met       houses were
                                        houses under        •	Monitor                              audited
                                        construction to       quality
                                        be audited            assurance
                                                              output
                                  7.3   Quality assurance                      9         Target    Structures	were	
                                        support                                          met       strengthened in
                                        structures to be                                           all 9 provinces
                                        strengthened in                                            (technical	staff	
                                        the provincial                                             appointed in all
                                        Departments                                                provinces)
                                        of	Human	
                                        Settlements




                                                                                                                  NHBRC ANNuAl REpORT 2011/2012   55
     Internal	business	process

     Strategic objective:	Strengthen	NHBRC	operating	processes,	systems	and	procedures.

      KPA                   KPA          KPI   KPI                 Key activities      Yearly    Target   Actual                 Reason for
                            budget       No.                                           targets   met      achievement            variation
                            allocation                                                           /not
                                                                                                 met
         I
      8.		T	and	technical	 R14.1m        8.1   2 technical         •		 evelop	fit	
                                                                     D                 72        Target   No	technical	audits	   Audits were
         support                               compliance            for purpose,                not      were	undertaken        supposed to
                                               audits to be          world-class	IT	             met                             be done by the
                                               undertaken	per	       and technical                                               central	office’s	
                                               province per          solutions                                                   technical section.
                                               quarter             •		 esearch	
                                                                     R                                                           However,	
                                                                     and identify                                                technical
                                                                     new and                                                     services were
                                                                     value-adding                                                decentralised, no
                                                                     NHBRC	                                                      need for technical
                                                                     products and                                                services
                                                                     services
                                         8.2   Reduce	dispute	                         60	days   Target   Disputes were
                                               resolution cases    •	Acquire,                    met      resolved	within	60	
                                               from	90	days	to	      embed and                            days
                                               60	days	              support
                                                                     NHBRC	IT	and	
                                                                     technology
                                         8.3   Reduce	number	                          1 day     Target   Dolomites were
                                                                     systems and
                                               of days for                                       met      assessed within
                                                                     business
                                               assessing                                                  1 day
                                                                     processes
                                               non-subsidy
                                               enrolments          •	Enter into
                                               (dolomites)	from	     strategic and
                                               2 days to 1 day,      value-adding
                                               from date of          industry
                                               receipt               partnerships
                                                                  •	Develop
                                         8.4   Number	of	days	      NHBRC	          15	days      Target   Subsidy	enrolments	
                                               for assessing        standards and                met      were accessed
                                               subsidy              brand                                 within	15	days
                                               enrolments to        P
                                                                  •		 ublish	NHBRC	
                                               be	retained	at	15	   solutions to
                                               days                 assist with
                                                                    quality home
                                         8.5   Number	of	days	                      10	days      Target   Multi-storey
                                                                    building
                                               for assessing                                     met      buildings were
                                                                    standards
                                               multi-storey                                               accessed	within	10	
                                               buildings                                                  days
                                               enrolments to be
                                               retained	at	10	
                                               days




56   NHBRC ANNuAl REpORT 2011/2012
KPA   KPA          KPI    KPI                  Key activities    Yearly    Target   Actual                   Reason for
      budget       No.                                           targets   met      achievement              variation
      allocation                                                           /not
                                                                           met
                   8.6    100%	of	all		       D
                                            •		 evelop	fit	      100%      Target   100%	of	all	non-
                          inspections to be   for purpose,                 met      subsidy inspections
                          done	on	the	PDA	    world-class	IT	                       done	on	PDA,	and	
                          system              and technical                         15%	of	all	subsidy	
                                              solutions                             inspections done
                                               •		 esearch	
                                                 R                                  on	PDA
                                                 and identify
                   8.7    18 events to be        new and         18        Target   Events were held
                          held in support        value-adding              met      in support of
                          of	Human	              NHBRC	                             Human	Settlement	
                          Settlements	           products and                       programmes
                          programmes             services

                   8.8    4 strategic          •	Acquire,        4         Target   4 strategic
                          partnership            embed and                 not      partnership
                          agreements to          support                   met      agreements were
                          be implemented         NHBRC	IT	and	                      implemented with
                          with industry          technology                         industry players
                          players                systems and
                                                 business
                   8.9    100%	of	the	BI	        processes       100%      Target   The	BI	system	was	
                          system to be         •	Enter into                met      completed and is
                          completed and          strategic and                      fully functioning
                          fully functioning      value-adding
                                                 industry
                                                 partnerships
                   8.10   100%	of	the	         •	Develop         100%      Target   The	e-VFP	system	        The	e-VFP	was	
                          e-VFP	system		to	      NHBRC	                    met      was completed            completed, but its
                          be completed           standards and                                               implementation
                          and functioning        brand                                                       into production
                                               •		 ublish	NHBRC	
                                                 P                                                           was stopped due
                                                 solutions to                                                to	the	new	ERP	
                                                 assist with                                                 system
                                                 quality home
                   8.11   100%	of	the	                           100%      Target   The enterprise
                                                 building
                          enterprise service                               met      service	framework	
                                                 standards
                          framework	to	be	                                          was completed
                          completed and
                          fully functioning

                   8.12   100%	of	the	                           100%      Target   The development          The	GIS	was	
                          NHBRC	GIS	to	be	                                 met      of	the	GIS	was	          completed, but its
                          completed and                                             completed                implementation
                          fully functioning                                                                  into production
                                                                                                             was stopped due
                                                                                                             to	the	new	ERP	
                                                                                                             system

                   8.13   100%	of	the	                           100%      Target   A project plan and       Awaiting
                          NHBRC	Home	                                      not      concept document         publication of
                          Building	Manual		                                met      was developed.           SANS10400
                          to	be	simplified	                                         The process is
                          and completed                                             awaiting approval
                                                                                    of	SANS10400,	
                                                                                    which was only
                                                                                    published in
                                                                                    November	2011

                   8.14   100%	of	the	                           100%      Target   Energy	efficiency	
                          energy	efficiency	                               met      guidelines were
                          guidelines to be                                          completed
                          completed

                   8.15   At least 1 article                     4         Target   4 articles were
                          to be published                                  met      published
                          per quarter




                                                                                                      NHBRC ANNuAl REpORT 2011/2012   57
     Innovation	learning	and	growth

     Strategic objective:	Create	a	learning	environment	and	build	capacities	to	products	and	services.

      KPA                   KPA          KPI   KPI                   Key activities        Yearly    Target   Actual                Reason for
                            budget       No.                                               targets   met/     achievement           variation
                            allocation                                                               not
                                                                                                     met
      9.	Human	capital	     R25.7m       9.1   100%	of	              •		 eview	and	
                                                                       R                100%         Target   100%	of	
                                               workplace	              develop	NHBRC	                met      workplace	skills	
                                               skills	plan	to	be	      business                               plan completed
                                               completed               partner human
                                                                       capital strategy
                                         9.2   100%	of	all	          •		 rovide	timely	
                                                                       P                100%         Target   100%	of	identified	
                                               identified	staff	      and high                       met      employees were
                                               to be trained          quality talent                          trained
                                               against the            management
                                               workplace	skills	      and other
                                               plan                   human capital
                                         9.3   Leadership             solutions to   100%            Target   None                  Training
                                               development            support	NHBRC	                 not                            postponed due
                                               module to be           business                       met                            to a number of
                                               implemented            processes                                                     vacant positions
                                                                       I
                                                                     •		mprove	and	
                                         9.4   100%	of	the	            strengthen          100%      Target   All DoL and other
                                               DoL and other           NHBRC	human	                  met      statutory returns
                                               statutory returns       resources	skills	                      were complied
                                               to be complied          base                                   with
                                               with                  •		 eview	and	
                                                                       R
                                                                       develop	NHBRC	
                                         9.5   100%	of	                performance    100%           Target   Performance	
                                               performance             and business                  met      agreements were
                                               agreements to           environment                            completed and
                                               be completed            enhancing                              acted upon
                                               and acted upon          solutions

                                         9.6   100%	of	the	                                100%      Target   Draft policy was      Development
                                               succession                                            not      developed, but        delayed due
                                               policy to be                                          met      has yet to be         to consultative
                                               implemented                                                    approved              process with
                                                                                                                                    relevant
                                                                                                                                    stakeholders

                                         9.7   50%	of	all	staff	                           50%       Target   80%	of	staff	
                                               to participate                                        met      participated in
                                               in	the	NHBRC	                                                  the wellness
                                               wellness                                                       programme
                                               programme

                                         9.8   Reduce	                                     40	days   Target   Recruitment	of	       Specialised	skills	
                                               recruitment of                                        not      specialised	skills	   not attracted to
                                               specialised	skills	                                   met      done	in	60	days       NHBRC
                                               from	60	days	to	
                                               40	days




58   NHBRC ANNuAl REpORT 2011/2012
NHBRC ANNuAl REpORT 2011/2012   59
SECTION 7
NATIONAL	HOME	BUILDERS	
REGISTRATION	COUNCIL
ANNUAL	FINANCIAL	STATEMENTS
for	the	year	ended	31	March	2012

Report of the Auditor-General              62

Statement of Responsibility                67

Statement of Financial Position            68

Statement of Financial Performance         69

Statement of Changes in Net Assets         70

Cash Flow Statement                        71

Notes to the Annual Financial Statements   72
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Annual	financial	statements	for	the	year	ended	31	March	2012




     report of the auditor-general
     REPORT	OF	THE	AUDITOR-GENERAL	TO	PARLIAMENT	ON	THE	
     NATIONAL	HOME	BUILDERS	REGISTRATION	COUNCIL
     REPORT	ON	THE	FINANCIAL	STATEMENTS

     Introduction

     1.    I	 ave	audited	the	financial	 statements	 of	the	National	Home	 Builders	 Registration	 Council (“NHBRC”)	
            	h
           set	out	on	pages	68	to	101,	which	 comprise	 the	statement	 of	financial	 position	as	at	31	March	2012,	
           the	statement	 of	financial	performance,	 statement	 of	changes	 in	net	assets	and the statement of cash
           flows for the year then ended, and the notes, comprising a summary of significant	 accounting	 policies	
           and	other	explanatory	 information.

     Accounting authority’s responsibility for the financial statements

     2.    The accounting authority is responsible for the preparation and fair presentation of these financial	
           statements	 in	 accordance	 with	South	African	Standards	 of	Generally	 Recognised	Accounting	 Practice	
           (SA	Standards	 of	GRAP)	and	the	requirements	 of	the	Public	Finance Management	 Act	of	South	Africa,	
           1999	 (Act	No.1	of	1999)(PFMA)	 and	 section	 15(6)(c)	 of	the Housing	 Consumer	 Protection	 Measures	
           Act	 (Act	 No.95	 of	 1998),	 and	 for	 such	 internal	 control as the accounting authority determines is
           necessary to enable the preparation of financial	statements that are free from material misstatement,
           whether due to fraud or error.

     Auditor-General’s responsibility

       	
     3.	   M
           	 y	responsibility	 is	to	express	 an	opinion	on	these	financial	statements	 based	on	my	audit.	I conducted
           my	 audit	 in	 accordance	 with	the	 Public	Audit	 Act	 of	South	 Africa,	 2004	 (Act	 No.	25	 of	2004)	 (PAA),	
           the General Notice 839 of 2011 issued in Government Gazette 34783 of 28 November 2011 issued
           in	terms	 thereof	 and	International	 Standards	 on	Auditing.	 Those standards	 require	 that	 I	comply	 with	
           ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
           the	financial	statements	 are	free	from	material misstatement.

     4.    An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
           in	the	financial	 statements.	The	procedures	 selected	depend	 on	the	auditor’s judgement, including the
           assessment	 of	the	risks	of	material	misstatement	 of	the	financial	statements, whether due to fraud or
           error.	 In	making	 those	 risk	 assessments,	 the	auditor considers internal control relevant to the entity’s
           preparation and fair presentation of the financial	 statements in order to design audit procedures
           that are appropriate in the circumstances, but not for	the	 purpose	 of	 expressing		an	 opinion	 on	the	
           effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
           accounting policies used and the reasonableness of accounting estimates made by management, as
           well as evaluating the overall presentation	 of	the	financial	 statements.

       	
     5.	   I believe	 that	the	 audit	 evidence	 I 	 have	 obtained	 is	sufficient	 and	 appropriate	 to	provide	 a	basis for
           		
           my	qualified	 audit	 opinion.

     Basis for qualified opinion

     Irregular expenditure

       	
     6.	   S
           	 ection	55(2)(b)(i)	of	the	PFMA	requires	the	entity	to	include	particulars	of	all	irregular expenditure	that	
           had	occurred	during	the	financial	year	in	its	financial	statements.	Furthermore section	51(1)(a)(iii)	of	




62   NHBRC ANNuAl REpORT 2011/2012
                                                                               NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                                                                                 	
                                                     Annual	financial	statements	for	the	year	ended	31	March	2012	




          report of the auditor-general
      the	PFMA	requires	that	an	appropriate	procurement		and	provisioning system be maintained which is
      fair, equitable, transparent, competitive and cost-effective.

7.    The entity did not have an adequate system for identifying and recognising all irregular expenditure	and	
      there were no satisfactory alternative procedures that I	     could perform to obtain reasonable assurance
      that	 all	 irregular	 expenditure	 had	 been	 properly	 recorded.	 Consequently,	 I	 was unable to obtain
      sufficient	 appropriate	 audit	evidence	to	satisfy	 myself	 as	to	the completeness	 of	irregular	 expenditure	
      relating	 to	the	current	year	 stated	 at	R201	304	808	in	note	24	to	the	financial	 statements.

Qualified opinion

8.	
  	   	n	my	opinion,	except	 for	the	possible	effects	 of	the	matter	described	 in	the	Basis for qualified opinion
      I
      paragraph,	 the	financial	 statements	 present	 fairly,	in	all	material	 respects,	 the	financial	position of the
      National	 Home	 Builders	 Registration	 Council	as	 at	31	March	 2012	 and	 its	financial	performance and
      cash	 flows	for	the	 year	then	 ended,	 in	accordance	 with	 SA	Standards	 of	GRAP	and the requirements
      of	the	PFMA	 and	section	 15(6)(c)	 of	the	Housing	 Consumer	 Protection	Measures Act.

Emphasis of matters

9.     draw	attention	 to	the	matters	 below.	My	opinion	 is	not	modified	 in	respect	 of	these	matters.
      I	

Significant uncertainties

     W
10.			 ith	reference	 to	note	26	‘contingent	 liabilities’	 to	the	financial	statements,	 relating	 to	pending court
     cases which have been disclosed as contingent liabilities, the ultimate outcome of these matters
     cannot presently be determined, and no provision for any liability that may result has been made in
     the	financial	 statements.

Restatement of corresponding figures

     A
11.			 s	disclosed	 in	note	28	to	the	financial	statements,	 the	corresponding		figures	 for	31	March	2011	have
     been	 restated	 as	 a	result	 of	an	error	discovered	 during	 31	March	 2012	 in	the	financial	statements of
     the	NHBRC	 at,	and	for	the	 year	ended,	 31	March	 2011.

REPORT	ON	OTHER	LEGAL	AND	REGULATORY		REQUIREMENTS

12.			n	 accordance	 with	 the	 PAA	 and	 the	 General Notice issued in terms thereof, I		report the following
     I
     findings	 relevant	 to	 performance	 against	 predetermined	 objectives,	 compliance	 with	 laws	 and
     regulations	 and	internal	 control,	but	 not	for	the	purpose	 of	expressing	 an	opinion.

PREDETERMINED OBJECTIVES

13. I	performed procedures to obtain evidence about the usefulness and reliability of the information in the
    annual	performance	report	as	set	out	on	pages	52	to	58	of	the	annual	report.

14. The reported performance against predetermined objectives was evaluated against the overall criteria
    of usefulness and reliability. The usefulness of information in the annual performance report relates
    to	 whether	 it	 is	 presented	 in	 accordance	 with	 the	 National	 Treasury	 annual reporting principles and
    whether the reported performance is consistent with the planned objectives. The usefulness of
    information further relates to whether indicators and targets are measurable	 (i.e.	 well-defined,	
    verifiable,	 specific,	 measurable	 and	 time	 bound)	 and	 relevant	 as required by the National Treasury
    Framework for Managing Programme Performance Information.




                                                                                            NHBRC ANNuAl REpORT 2011/2012    63
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Annual	financial	statements	for	the	year	ended	31	March	2012




     report of the auditor-general
          T
     15.			 he	reliability	 of	the	information	 in	respect	 of	the	selected	objectives	 is	assessed	 to	determine whether
          it	adequately	 reflects	 the	facts	(i.e.	whether	 it	is	valid,	accurate	 and	 complete).

     16.		The	material	findings	 are	as	follows:

     Usefulness of information

          T
     17.			 he	National	Treasury	 Framework	 for	Managing	 Programme	 Performance	 Information	 (FMPPI)	requires
          that indicators/measures	 should	 have	 clear	 unambiguous	 data	 definitions	 so	 that	 data	 is collected
          consistently	 and	 is	easy	 to	understand	 and	use.	A	total	 of	39%	 of	the	 indicators	relevant	 to	Program	
          2:	 Customer	 P erspective	 was	 not	 well-defined	 in	 that	 clear,	 unambiguous	data	 definitions	 were	 not	
          available to allow for data to be collected consistently.

     Additional matter

     18. I	 draw attention to the following matter below. This matter does not have an impact on the pre-
         determined	 objectives	 audit	 findings	 reported	above.

     Achievement of planned targets

          O
     19.			 n	the	total	number	 of	planned	 targets,	 13	targets	were	not	 achieved	 during	 the	financial	 year under
          review.	 This	 represents	 24%	 of	the	total	 planned	 targets	 that	 were	 not	 achieved	 during	 the financial	
          year under review.

     COMPLIANCE WITH LAWS AND REGULATIONS

           I
     20.		 	 	 performed procedures to obtain evidence that the entity has complied with applicable laws and
           regulations	 regarding	 financial	matters,	 financial	management	 and	 other	 related	 matters.	My findings	
           on material non-compliance with	specific	 matters	 in	key	 applicable	 laws	 and	regulations as set out in
           the General Notice issued	 in	terms	of	the	PAA	are	as	follows:

     Annual Financial Statements

          T
     21.			 he	financial	 statements	 submitted	 for	auditing	 were	not	 prepared	 in	accordance	 with	the prescribed
          financial	 reporting	 framework	 as	required	 by	section	 55(1)(a)	 and	(b)	of	the	PFMA.

           M
     22.		 	 aterial	 misstatements	 of	 revenue	 and	 disclosure	 items	 identified	 by	 the	 auditors	 in	 the submitted
           financial	 statements	 were	 subsequently	 corrected,	 but	the	 potential	 undisclosed irregular	 expenditure	
           resulted	 in	the	financial	statements	 receiving	 a	qualified	 audit	opinion.

     Expenditure management

          T
     23.			 he	accounting	 authority	 did	not	 take	 effective	 steps	to	prevent	 irregular	 expenditure,	 as	required by
          section	 51(1)(b)(ii)	 of	the	Public	 Finance	Management	 Act.

     Revenue management

          T
     24.			 he	 accounting	 authority	 did	 not	 take	 effective	 and	 appropriate	 steps	 to	 collect	 all	 money	 due,	 as
          required	 by	 section	 51(1)(b)(i)	 of	 the	 Public	 Finance	 Management Act and Treasury Regulations
          31.1.2(a)	 and	 31.1.2(e).




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                                                    Annual	financial	statements	for	the	year	ended	31	March	2012	




          report of the auditor-general
Financial misconduct

     I
25.			nvestigations	 into	 allegations	 of	 financial	 misconduct	 against	 officials	 were	 not	 instituted	 within
     30	days	of	discovery	 thereof,	 as	required	 by	Treasury	 Regulation	 33.1.2.

Internal Audit

      	
26.		 Internal	audit	did	not	 evaluate	 the	 reliability	and	integrity	 of	financial	 and	 operational	information, as
      required	 by	Treasury	 Regulation	 27.2.10(b).

      	
27.		 Internal	audit	did	not	evaluate	 compliance	with	laws	and	regulations,	as	required	by	Treasury	Regulation	
      27.2.10(e).

      I
28.		 	nternal	 audit	 did	 not	 evaluate	 the	 effectiveness	 and	 efficiency	 of	 controls	 and	 did	 not	 make	
      recommendations for its enhancement and improvement, as required by Treasury Regulation 27.2.10.

Non compliance with Housing Consumers Protection Measures Act

     S
29.			 ections	7	and	53(3)	of	the	PFMA	and	Treasury	Regulations	31.3	require	an	entity	to	have	an investment
     policy approved by the appropriate accounting authority, which in this case is defined	as the council. Unless
     exempted	by	National	Treasury,	all	surplus	funds	must	be	invested	with	the	Corporation	for	Public	Deposits.

     T
30.			 he	Housing	 Consumer	 Protection	 Measures	 Act	(Act	 No.95	 of	 1998)	 section	 16(7)	 requires	 that the
     funds	 of	the	 Council	 or	 any	 fund	 may,	 subject	 to	 subsection	 (4)	 and	 subject	 to	the	 approval	 of the
     Minister with the concurrence of the Minister of Finance, be invested in accordance with the policies
     approved by the Council.

      	
31.		 Unless	 the	above	 approvals	 were	 obtained	 Public	Entities	 listed	in	schedule	 3A	must	 invest	 all surplus
      funds	with	the	Corporation	 of	Public	Deposits.	The	NHBRC	has	not	received	 approval from the Minister
      of	Finance,	 or	National	Treasury	 as	required.

      	
32.		 NHBRC	 is	 in	 contravention	 	 with	 the	 Housing	 Consumers	 Protection	 Measures	 Act	 (Act	 No.95	 of
      1998)	and	Treasury	 Regulation	 31.3.3	as	the	surplus	 funds	 of	R133	564	122	were not invested at the
      Corporation	 for	Public	 Deposits.

Procurement and contract management

     G
33.			 oods	 and	 services	 with	 a	transaction	 value	 below	 R500	 000	 were	 procured	 without	 obtaining the
     required	 price	quotations,		as	required	 by	Treasury	 Regulation	 16A6.1.

     G
34.			 oods	and	services	 of	a	transaction	 value	above	R500	 000	were	procured	 without	inviting competitive
     bids,	 as	required	 by	Treasury	Regulation	16A6.1.

     T
35.			 he	preference	point	system	 was	not	applied	in	the	procurement		of	goods	and	services	above	R30	000	
     (Vat	included)	 as	per	PPPF	Act	section	2(a).

INTERNAL CONTROL

36. I	 considered	 internal	 control	 relevant	 to	 my	 audit	 of	 the	 financial	 statements,	 annual	 performance
    report and compliance with laws and regulations. The matters reported below under the fundamentals




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     Annual	financial	statements	for	the	year	ended	31	March	2012




     report of the auditor-general
          of	 internal	 control	 are	 limited	 to	 the	 significant	 deficiencies	 that	 resulted	 in	 the	 basis	 for	 qualified	
          opinion,	 the	findings	on	the	annual	performance	 report	 and	the	findings	on compliance with laws and
          regulations included in this report.

     Leadership

           T
     37.		 	 he	 accounting	 authority	 did	 not	 exercise	 adequate	 oversight	 responsibility	 over	 financial	 and
           performance reporting and compliance and related internal controls.

          T
     38.			 he	 accounting	 authority	 did	 not	 adequately	 review	 the	 financial	 statements	 and	 the	 report	 on
          predetermined	 objectives	prior	to	the	submission	 for	audit.	Several	adjustments	 had	to	be	made during
          the audit. There was material non compliance by the entity with legislation.

          T
     39.			 he	IT	governance	 framework	 was	not	 sufficient	 to	support	 and	 enable	 the	business,	 to	deliver value
          and	improve	 performance.	 General	and	application	controls	 are	not	adequate	 and focussed to achieve
          reliable and accurate data outputs.

     Financial and performance management

          	T
     40.			 	 he	design	 and	implementation	of	formal	controls	 over	the	IT	system	 were	not	 adequate,	as limited to
            no	reliance	 could	 be	 placed	 on	 the	 accuracy	 and	 validity	 of	 financial	 information obtained from the
            system.

     41. Management did not have adequate control to ensure compliance with legislation. The procurement
         process did not fully comply with the requirements of the supply chain legislation management
         requirements.

     Governance

     42. The internal audit department was not functioning effectively in the period under review.


     OTHER	REPORTS	
     Investigations

           	
     43.		 Investigations	 were	conducted	 to	probe	allegations	 of	irregular	 tendering	 processes	 and allegations of
           conflict of interests and appointment of senior staff. The investigations have been finalised.	Disciplinary	
           processes are still ongoing as at year-end.




     Pretoria
     31	July	2012




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                                                       Annual	financial	statements	for	the	year	ended	31	March	2012	




                    Statement of responsibility
The	Council,	which	is	the	Accounting	Authority	of	the	National	Home	Builders	Registration	Council	(NHBRC),	
is	 responsible	 for	 the	 preparation,	 integrity	 and	 fair	 presentation	 of	 the	 annual	 financial	 statements	 of	 the	
NHBRC.	 	               	         	          	           	          	           	

The	annual	financial	statements	for	the	year	ended	31	March	2012	presented	on	pages	68	to	101	have	been	
prepared	 in	 accordance	 with	 the	 effective	 Standards	 of	 Generally	 Recognised	 Accounting	 Practice	 (GRAP)	
including	any	interpretations,	guidelines	and	directives	issued	by	the	Accounting	Standards	Board.		 	            	

They are based on appropriate accounting policies which have been consistently applied and which are
supported by reasonable and prudent judgements and estimates. The going concern basis has been adopted
in	preparing	the	annual	financial	statements.		The	Council	has	no	reason	to	believe	that	the	NHBRC	will	not	be	
a going concern in the foreseeable future based on forecasts and available cash resources.

The	Council	is	also	responsible	for	the	NHBRC’s	system	of	internal	controls.		These	are	designed	to	provide	
reasonable,	but	not	absolute,	assurance	as	to	the	reliability	of	the	annual	financial	statements	and	to	adequately	
safeguard,	verify	and	maintain	accountability	of	assets.		These	controls	are	monitored	throughout	the	NHBRC	
by management and employees, in an attempt to address the segregation of authority and duties with available
resources.	The	Council	continues	to	design	and	implement	processes	to	monitor	internal	controls,	to	identify	
material	breakdowns	and	implement	timely	corrective	action.	             	          	         	          	        	

The	 Council,	 and	 NHBRC	 management,	 treat	 corporate	 governance	 matters	 seriously,	 and	 whenever	 any	
instances of non-compliance to regulation are uncovered or reported, appropriate disciplinary measures in
terms of policy and legislation are instituted.

The	annual	financial	statements	were	approved	by	the	Council	on	31	July	2012	and	are	signed	on	its	behalf:	 	




Adv.	M.B	Madumise	               	           	          	          	          	           	          	
Chairperson	of	Council	          	           	          	          	          	           	          	




Dr J Mahachi
Acting	Chief	Executive	Officer	              	          	          	          	           	          	           	




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     Annual	financial	statements	for	the	year	ended	31	March	2012




     Statement of financial position
                                                                                           Restated
                                                                             2012              2011
                                                           Notes                 R                 R


      ASSETS
      Non-current assets
      Property,	plant	and	equipment                          2         36,712,371       	35,958,079	
      Intangible	assets                                      3         11,372,762       	22,552,513	
      Investments                                            4      	1,662,646,580	   	1,252,132,156	
                                                                    	1,710,731,713	   	1,310,642,748	


      Current assets
      Investments                                            4      	2,031,002,393	   	1,866,709,556	
      Inventories                                            5            	394,530	         	120,264	
      Trade and other receivables                            6         	59,127,592	      	35,606,341	
      Cash	and	cash	equivalents                              7         	43,050,972	    	354,256,747	
                                                                    	2,133,575,487	   	2,256,692,908	
      TOTAL ASSETS                                                  	3,844,307,200	   	3,567,335,656	


      EQUITY AND LIABILITIES
      Equity
      Accumulated surplus                                           	2,546,896,242	   	2,407,928,463	
      Emerging contractor reserve                            8         31,317,612        36,721,269
      Non-distributable	reserve                              9         24,313,686         	5,647,629	
                                                                    	2,602,527,540	   	2,450,297,361	


      LIABILITIES
      Non-current liabilities
      Provision	for	outstanding	claims                      10         	31,816,596	      	39,234,521	
      Provision	for	unearned	premium                        10        141,344,619      	115,448,951	
      Provision	for	unexpired	risk                          10       	602,408,953	     	422,685,227	
                                                                     	775,570,168	     	577,368,699	
      Current liabilities
      Trade and other payables                              11       	251,762,176	     	328,030,526	
      Provisions                                            12         13,368,113         1,368,898
      Provision	for	outstanding	claims                      10         	19,942,440	      22,643,723
      Provision	for	unearned	premium                        10        181,136,763      	187,626,450	
                                                                     	466,209,492	     	539,669,597	
      Total equity and liabilities                                  	3,844,307,200	   	3,567,335,656	


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                                                      Annual	financial	statements	for	the	year	ended	31	March	2012	




Statement of financial performance
                                                                                                            Restated
                                                                                 2012                            2011
                                                   Notes                             R                                R


Insurance	premium	revenue                           13                   227,674,344                   	356,560,296	
Fee revenue                                         14                   	55,986,257	                    	31,907,933	
Technical services revenue                          15                  	183,656,462	                    	80,396,035	
Investment	income                                   16                  	197,357,574	                  	203,122,056	
Realised	profit	on	sale	of	available-for-sale	                           	17,955,244	                   126,472,192
investments
Fair	value	gain	on		financial	instruments                                	15,928,845	                                  -
Other income                                        17                   	42,438,202	                        881,299
Net income                                                              	740,996,928	                   799,339,811


Insurance	claims	and	loss	adjustment	expenses       18                     	5,255,613	                   	11,542,190	
Inspections	and	operating	expenses                                        76,928,941                     	59,041,867	
Technical	services	expenditure                                          	186,403,203	                    	27,700,625	
Administration	expenses                                                 	329,999,135	                  	330,631,250	
Asset management services                                                  	8,845,339	                     8,768,668
Expenses                                                                	607,432,231	                  	437,684,600	


Results from operating activities                   19                  	133,564,697	                  	361,655,212	
Finance costs                                       20                           	575	                            	255	
Surplus for the year                                                    	133,564,122	                  	361,654,957	


Other comprehensive income
Gain	on	available	for	sale	investments	taken	to	
equity                                                                   	52,550,146	                    	70,135,529	
Other comprehensive income for the year                                  	52,550,146	                    	70,135,529	
Total comprehensive income for the year                                  186,114,268                   	431,790,486	




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     Annual	financial	statements	for	the	year	ended	31	March	2012




     Statement of changes in net assets
                                                    Accumulated        Emerging              Non-             Total
                                                         surplus      contractor    distributable
                                                                         reserve          reserve
                                                                R              R                R                 R



     Balance at 31 March 2010 restated             	2,038,968,994	   	44,025,781	      61,984,292    	2,144,979,067	

     Surplus	for	the	year	-	restated	
     (note	28)                                      	361,654,957	               -                -    	361,654,957	
     Reserve	utilised	(note	19)	                       	7,304,512	   	(7,304,512)                -                -

     Gain	on	available	for	sale	investments	
     taken	to	equity	(note	4)                                   -               -     	70,135,529	      	70,135,529	
     Realised	profit	on	sale	of	available-
     for-sale	investments	(note	4)                              -               -   	(126,472,192)   	(126,472,192)
     Balance at 31 March 2011 restated             	2,407,928,463	   36,721,269        	5,647,629	   	2,450,297,361	

     Surplus	for	the	year                           	133,564,122	               -                -    	133,564,122	

     Reserve	utilised	(note	19)                        	5,403,657	   	(5,403,657)                -                -

     Gain	on	available	for	sale	investments	
     taken	to	equity	(note	4)                                   -               -     	52,550,146	      	52,550,146	

     Realised	profit	on	sale	of	available-
     for-sale	investments	(note	4)                              -               -    	(33,884,089)    	(33,884,089)
     Balance	at	31	March	2012                      	2,546,896,242	   31,317,612        24,313,686    	2,602,527,540	




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                                                   Annual	financial	statements	for	the	year	ended	31	March	2012	




                                               cash flow statement
                                                                                                        Restated

                                                                             2012                             2011

                                                Notes                             R                               R



Cash flows from operating activities

Cash	(utilised	in)/generated	from	operations    21.1                  	18,535,584	                  	259,939,322	

	-	Cash	receipts	from	customers                                      	443,795,812	                  484,469,731

	-	Cash	paid	to	suppliers	and	employees                            	(425,260,228)                 	(224,530,409)

Interest	paid                                                                	(575)                          	(255)

Interest	received                                                      	1,534,991	                       	719,004	

Net cash inflow from operating activities                             	20,069,999	                  	260,658,071	


Cash flows from investing activities

Purchase	of	property,	plant	and	equipment	                            	(5,164,879)                   	(3,440,445)

Proceeds	on	disposal	of	property,	plant	        21.2                      417,942                          	47,589	
and equipment

Purchase	of	intangible	assets                                            	(94,304)                                 -

Withdrawals                                                                       -                                -

Purchase	of	financial	assets                                     	(2,678,834,460)               	(2,438,128,471)

Proceeds	on	sale	of	financial	assets            21.3               2,367,774,748                 	2,526,724,645	

Net cash outflow from investing activities                         	(315,900,953)                    	85,203,318	


Cash flows from financing activities

Claims	paid                                                          	(15,374,821)                  	(22,269,995)

Net cash outflow from financing activities                           	(15,374,821)                  	(22,269,995)


Net increase/(decrease) in cash and cash                           	(311,205,775)                   	323,591,394	
equivalents


Cash and cash equivalents at beginning                               	354,256,747	                   	30,665,353	
of year


Cash and cash equivalents at the end
of the year                                     21.4                  	43,050,972	                  	354,256,747	




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     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     	        	 he	NHBRC	is	a	statutory	body	incorporated	in	terms	of	the	Housing	Consumers	Protection	Measures	Act,	(Act	No.	95	of	
              T
              1998).	Its	principle	business	is	the	regulation	of	the	home	building	industry	and	protection	of	housing	consumers	by	the	
              establishment of a warranty fund.


     1.1      Basis of preparation
     	        	n	terms	of	section	55(1)	of	the	Public	Finance	Management	Act	(Act	No.1	of	1999)	(PFMA),	the	NHBRC	is	required	to	
              I
              comply	with	South	African	Statements	of	Generally	Accepted	Accounting	Practice,	unless	the	Accounting	Standards	Board	
              approves	the	application	of	South	African	Statements	of	Generally	Recognised	Accounting	Practice.
     	        T
              	 he	financial	statements	have	been	prepared	in	accordance	with	the	effective	Standards	of	Generally	Recognised	
              Accounting	Practices	(GRAP)	including	any	interpretations,	guidelines	and	directives	issued	by	the	Accounting	Standards	
              Board.
     	        D
              	 uring	the	year,	a	number	of	standards	of	GRAP	became	effective	for	the	current	financial	period.	A	brief	description	
              of	these	standards	as	well	as	an	estimate	of	the	impact	is	contained	in	Note	1.2.	A	full	list	of	the	GRAP	Framework	is	
              contained	in	Directive	5.	In	the	absence	of	a	GRAP	standard,	the	GRAP	hierarchy	in	GRAP	3	-	Accounting	policies,	changes	
              in	accounting	estimates	and	errors	are	used	to	develop	an	appropriate	accounting	policy.	In	terms	of	GRAP	3,	judgment	
              must	be	used	when	developing	an	accounting	policy.	In	applying	judgement,	GRAP	3	requires	that	management	refers	to	
              and considers the applicability of the following sources in descending order:
     	        (a)	 the	requirements	and	guidance	in	Standards	of	GRAP	dealing	with	similar	and	related	issues;	and
     	             t
              (b)	 	 he	definitions,	recognition	criteria	and	measurement	concepts	for	assets,	liabilities,	revenue	and	expenses	set	out	in	
                   the	Framework	for	the	Preparation	and	Presentation	of	Financial	Statements.
     	        These	accounting	policies	are	consistent	with	those	of	the	prior	financial	year.
     	        T
              	 he	annual	financial	statements	have	been	prepared	on	the	historical	cost	basis,	except	for	the	measurement	of	certain	
              financial	instruments	at	fair	value	less	point	of	sale	costs,	and	incorporate	the	principal	accounting	policies	set	out	below.
     	        T
              	 he	NHBRC	concluded	that	the	annual	financial	statements	present	fairly	the	Council’s	financial	position,	financial	
              performance	and	cash	flow	for	the	year	ended	in	accordance	with	SA	Standards	of	GRAP	and	in	the	manner	required	by	
              the	PFMA	and	section	15	(6)(c)	of	the	Housing	Consumer	Protection	Measures	Act	(	Act	No.95	of	1998)


     1.2      Application of new accounting standards
              The following standards, amendments to standards and interpretations which are relevant to the Council, have been
              adopted in these financial statements:
              GRAP 1:         Presentation of Financial Statements (Revised)
                              Incorporates	guidance	on	how	entities	as	part	of	their	accounting	policies	should	disclose	the	extent	to	which	
                              they	have	taken	advantage	of	any	transitional	provisions	in	adopting	the	standards	of	GRAP	and	commentary	
                              should	be	added	to	explain	where	there	has	been	a	departure	from	a	particular	Standard	of	GRAP	and	that	
                              departure	is	material,	entities	cannot	claim	compliance	with	Standards	of	GRAP.
              GRAP 3:         Changes in Accounting Estimates and Errors (Revised)
                              Provides	clarity	that	changing	an	entity’s	basis	of	accounting	is	a	change	in	an	accounting	policy,	and	that	
                              certain changes within a basis of accounting may also be a change in accounting policy.
              GRAP 9:         Revenue from Exchange Transactions (Revised)
                              The	definition	of	revenue	in	terms	of	GRAP	9	incorporates	the	concept	of	service	potential.	Revenue	is	the	
                              gross	inflow	of	economic	benefits	or	service	potential	when	those	inflows	result	in	an	increase	in	net	assets,	
                              other than increases relating to contributions from owners.
     	        	    	          Entities	may	derive	revenue	from	exchange	or	non-exchange	transactions.
     	        	    	          A
                              	 n	exchange	transaction	is	one	in	which	the	entity	receives	resources	or	has	liabilities	extinguished,	and	
                              directly	gives	approximately	equal	value	to	the	other	party	in	exchange.
     	        	    	          	 on-exchange	revenue	transaction	is	a	transaction	where	an	entity	receives	value	from	another	entity	
                              N
                              without	directly	giving	approximately	equal	value	in	exchange.
     	        	    	          A
                              	 n	entity	recognises	revenue	when	it	is	probable	that	economic	benefits	or	service	potential	will	flow	to	the	
                              entity,	and	the	entity	can	measure	the	benefits	reliably.
     	        	    	          C
                              	 larifies	that	this	standard	only	applies	to	revenue	from	exchange	transactions.	This	standard	will	not	have	a	
                              material	impact	on	the	NHBRC.




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                                                            Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



        GRAP 12:      Inventories (Revised)
                      The	fair	value	measurement	has	been	removed.	Inventories	are	not	measured	at	their	fair	value	except	if	the	
                      entity	is	a	commodity	broker,	which	is	not	common	in	the	public	sector.
        GRAP 13:      Leases (Revised)
                      Incorporates	additional	guidance	on	the	concept	of	substance	and	legal	form	of	a	transaction,	to	illustrate	
                      the	difference	between	lease	and	other	contracts	and	on	operating	lease	incentives.	In	certain	circumstances,	
                      legislation	may	prohibit	the	entering	into	certain	types	of	lease	agreements.	If	the	entity	has	contravened	
                      these	legislative	requirements,	the	entity	is	still	required	to	apply	the	requirements	of	GRAP	13.
	       	   	         Other	than	the	abovementioned	requirements,	there	is	no	other	impact	on	the	initial	adoption	of	GRAP13.
        GRAP 14:      Events after the reporting date (Revised)
                      An event, which could be favourable or unfavourable, that occurs between the reporting date and the date
                      the	annual	financial	statements	are	authorised	for	issue.	The	impact	of	the	standard	is	not	material.	
        GRAP 16:      Investment Property (Revised)
                      This standard prescribes the accounting treatment for investment property and related disclosure
                      requirements. The impact of the standard is not material.
        GRAP 17:      Property, Plant and Equipment (Revised)
                      Does not require or prohibit the recognition of heritage assets, but if an entity recognises heritage assets the
                      entity	needs	to	comply	with	GRAP	17	disclosure	requirements.
	       	   	         	 dditional	commentary	has	been	included	to	clarify	the	recognition	and	measurement	of	exploration	and	
                      A
                      evaluation	assets	in	terms	of	GRAP	17.
	       	   	         	 here	assets	are	held	for	rental	to	others	in	the	ordinary	course	of	operations	and	the	entity	subsequently	
                      W
                      sells	the	assets,	the	Standard	of	GRAP	on	Non-current	Assets	held	for	Sale	and	Discontinued	Operations	does	
                      not	apply.	The	sale	of	such	assets	is	treated	under	GRAP	12	on	inventories.	
                      The disclosure requirement for temporarily idle, fully depreciated property, plant and equipment that are
                      retired from active use is encouraged rather than required.
                      The disclosure of the cost of property, plant and equipment measured at fair value is no longer required.
                      The impact of the standard is not material but will result in additional disclosure.
        GRAP 19:      Provisions, Contingent Liabilities and Contingent Assets
	       	   	         E
                      	 xcludes	from	its	scope	those	provisions	and	contingent	liabilities	arising	from	social	benefits	for	which	
                      it	does	not	receive	consideration	that	is	approximately	equal	to	the	value	of	goods	and	services	provided	
                      directly	in	return	from	the	recipients	of	those	benefits.
	       	   	         F
                      	 or	the	purpose	of	GRAP	19,	social	benefits	refers	to	goods,	services	and	other	benefits	provided	in	the	
                      pursuit of the social policy objective of a government. This standard includes guidance on the accounting of
                      these	social	benefits.
                      Outflow of resources embodying service potential also needs to be considered in when assessing if a present
                      obligation	that	arises	from	past	events	exists	or	not.
                      Additional disclosure for each class of provision regarding reductions in the carrying amounts of provisions
                      that	result	from	payments	or	other	outflows	of	economic	benefits	or	service	potential	made	during	the	
                      reporting period and reductions in the carrying amounts of provisions resulting from re-measurement of
                      the	estimated	future	outflow	of	economic	benefits	or	service	potential,	or	from	settlement	of	the	provisions	
                      without cost to the entity. The impact of the standard is not material.
1.2.1   Standards, interpretations and amendments to published standards effective for reporting periods commencing on or after
        1 April 2011 not adopted by the NHBRC.
        GRAP 100:		 Non-current	Assets	held	for	sale
        The impact of the standard is not material but will result in additional disclosure.


1.3     New accounting standards not yet effective
1.3.1   The following Standards of GRAP should be applied by public entities, constitutional institutions, municipalities and
        municipal entities for the period beginning 01 April 2012:
        GRAP 21:      Impairment of Non-cash-generating Assets
        GRAP 23:      Revenue from Non-exchange Transactions (Taxes and Transfers)
        GRAP 24:      Presentation of Budget Information in the Financial Statements




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     1.3.1    The following Standards of GRAP should be applied by public entities, constitutional institutions, municipalities and
              municipal entities for the period beginning 01 April 2012: (continued)
              GRAP 26:        Impairment of Cash-generating Assets
              GRAP 103:       Heritage Assets
              GRAP 104:       Financial Instruments
     1.3.2    A brief summary of the transitional provisions for each Standard, along with possible first-time adoption issues, is outlined
              below:
              GRAP 21 and 26:         Impairment of Non-cash-generating Assets and Impairment of Cash-generating
                                      Assets
                                      	mpairment	of	Non-cash-generating	Assets	and	Impairment	of	Cash-generating	Assets	should	be	
                                      I
                                      applied	prospectively.	Previously,	entities	would	have	applied	IAS	36	Impairment	of	Assets	and	IPSAS	
                                      21	Impairment	of	Non-cash-generating	Assets	in	assessing	their	assets	for	impairment.	

     	        	    	          	       A
                                      	 lternatively	they	would	have	used	GRAP	21	or	26	in	formulating	an	accounting	policy.	As	GRAP	21	and	
                                      GRAP	26	are	similar	to	IAS	36	and	IPSAS	21,	only	limited	first	time	adoption	issues	are	likely	to	arise.

              GRAP 23:        Revenue from Non-Exchange Transactions

                              Should	 be	 applied	 retrospectively	 in	 accordance	 with	 GRAP	 3	 Accounting Policies, Changes in Accounting
                              	
                              Estimates and Errors.	 Entities	 should	 analyse	 their	 existing	 revenue	 arrangements,	 develop	 criteria	 and	
                              policies.	These	can	be	used	to	distinguish	and	account	for	exchange	and	non-exchange	revenue.	 	

     	        	    	          •	      	 ublic	 entities:	 Public	 entities	 have	 used	 GRAP	 23	 to	 formulate	 their	 accounting	 policies	 for	 non-
                                      P
                                      exchange	revenue	since	2009.	The	full	adoption	of	GRAP	23	does	mean	that	entities	will	now	need	to	
                                      comply with all the disclosure requirements in full.

     	        	    	          •	      M
                                      	 unicipalities:	 One	 of	 the	 key	 issues,	 particularly	 for	 municipalities,	 is	 the	 difference	 between	 GRAP	
                                      23	and	GAMAP	9	Revenue	regarding	the	treatment	of	grants	and	other	transfers.	Under	GAMAP	9,	
                                      entities may have deferred the recognition of revenue from grants and other transfers until the related
                                      expenditure	was	incurred.	GRAP	23	only	allows	the	deferral	of	revenue	when	a	valid	obligation	exists.	
                                      A	valid	obligation	only	exists	where	a	grant	or	transfer	is	subject	to	conditions,	i.e.	the	resources	(which	
                                      may	be	cash	or	other	assets)	must	be	used	in	a	certain	way	or	returned	to	the	transferor.	Entities	should	
                                      therefore	review	their	existing	arrangements	and	balances	to	identify	whether	any	grants	or	transfers	
                                      are	subject	to	conditions	(as	defined	in	GRAP	23)	and	whether	a	liability	should	in	fact	be	recognised.	
                                      Any	existing	liabilities	which	arise	from	grants	and	transfers	that	are	not	subject	to	conditions	should	
                                      be	derecognised	and	accumulated	surplus	or	deficit	adjusted	using	GRAP	3.	Similarly,	where	any	new	
                                      liabilities	are	identified	as	a	result	of	grants	and	transfers	that	are	subject	to	conditions,	these	should	
                                      be recognised as a liability. Another area where changes in accounting policy may be required is the
                                      recognition	 of	 revenue	 related	 to	 fines.	 Under	 GRAP	 23,	 entities	 should	 recognise	 fines	 when	 the	
                                      receivable meets the criteria to be recognised as an asset.

              GRAP 24:        Presentation of Budget Information in the Financial Statements

                              P
                              	 resentation	of	Budget	Information	in	the	Financial	Statements	should	be	applied	prospectively.	In	previous	
                              reporting periods, entities would have presented a brief comparison of budgeted and actual amounts in the
                              financial	statements	in	order	to	comply	with	the	requirements	of	GRAP	1	Presentation of Financial Statements.
                              GRAP	24	requires	a	detailed	comparison	of	actual	and	budgeted	information	either	by	including	an	additional	
                              column	 in	 the	 financial	 statements	 (where	 the	 actual	 and	 budgeted	 results	 are	 on	 the	 same	 basis)	 or,	 by	
                              presenting	 a	 separate	 statement	 of	 comparison	 of	 budgeted	 and	 actual	 information.	 Where	 budgeted	 and	
                              actual	 information	 is	 prepared	 using	 a	 different	 basis	 (i.e.	 basis	 of	 accounting,	 classification	 and,	 includes	
                              different	entities	or	activities),	actual	information	is	adjusted	so	that	it	is	comparable	to	the	budgetary	basis.	It	
                              is	expected	that	the	National	Treasury	may	issue	guidance	outlining	the	format	of	the	comparison	for	certain	
                              types	 of	 entities.	 Entities	 should	 however	 familiarise	 themselves	 with	 the	 requirements	 of	 the	 Standards,	
                              identify the differences between the basis used to prepare the budget and actual information and, develop
                              policies to facilitate comparison and reconciliation of the information.

              GRAP	103:		 Heritage Assets

     	        	    	          	 eritage	Assets	should	be	applied	retrospectively.	Previously,	no	prescriptive	accounting	requirements	existed	
                              H
                              for heritage assets2.	Although	GRAP	103	should	be	applied	retrospectively,	entities	are	granted	a	period	of	




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                    three years in which to measure their heritage assets. These transitional provisions are similar to those granted
                    to	medium	and	low	capacity	municipalities	for	other	asset-related	Standards.	Although	entities	are	allowed	
                    three years within which to comply with the initial and subsequent measurement requirements of the standard,
                    entities	 should	 undertake	 a	 physical	 verification	 of	 the	 heritage	 assets	 on	 hand	 at	 31	 March/30	 June	 2012	
                    to	 assist	 in	 determining	 the	 opening	 balance	 for	 the	 2012/13	 reporting	 period.	 To	 do	 this,	 entities	 would	
                    need to develop a policy for distinguishing heritage and other assets such as property, plant and equipment,
                    investment properties, inventories, intangible assets etc., and apply this policy in identifying heritage assets
                    that	are	to	be	included	in	the	asset	register.	As	an	opening	balance	is	required	for	heritage	assets	(both	for	
                    the	2012/13	reporting	period	and	the	comparative	period),	entities	should	undertake	a	significant	amount	of	
                    work	in	advance	of	the	effective	date	of	1	April	2012	in	order	to	comply	with	the	Standard	and	to	apply	it	
                    retrospectively.

      GRAP 104:     Financial Instrument

                    	 inancial	 Instruments	 should	 also	 be	 applied	 retrospectively,	 except	 where	 indicated	 otherwise.	 	 In	 previous	
                    F
                    reporting	periods,	entities	would	have	applied	IAS	39	or,	they	may	have	used	GRAP	104	to	formulate	their	
                    accounting	policies.	The	main	difference	between	GRAP	104	and	IAS	39	is	the	elimination	of	certain	categories	
                    of	financial	assets	in	GRAP	104.	As	a	result	of	these	differences	in	categorisation,	entities	should	analyse	the	
                    financial	assets	recognised	as	at	31	March/30	June	2012	and	categorise	them	using	the	requirements	in	GRAP	
                    104.	Entities	should	also	take	note	of	the	carrying	values	and	fair	values	of	any	instruments	at	that	date	as	these	
                    will form the basis of either the fair value or carrying value going forward.
1.4   Insurance technical result
	     T
      	 he	technical	result	is	determined	on	an	annual	basis	whereby	the	incurred	cost	of	insurance	claims	and	related	expenses,	
      together with any change in other technical provisions is charged against the earned proportion of insurance premiums, as
      follows:
      Insurance premiums written
	     	nsurance	premiums	are	defined	as	an	enrolment	fee	in	terms	of	Section	14	of	the	Housing	Consumers	Protection	Measures	
      I
      Act.	Insurance	premiums	written	relate	to	business	incepted	during	the	year,	together	with	any	differences	between	booked	
      insurance premiums for prior years and those previously accrued. They include the insurance premiums for the whole of
      the	period	of	risk	covered	by	the	warranty	regardless	of	whether	or	not	these	are	wholly	due	for	payment	in	the	accounting	
      period.
      Insurance	 premiums	 written	 comprise	 the	 total	 insurance	 premiums	 payable	 by	 the	 insured	 to	 which	 the	 insurer	 is	
      contractually	entitled	and	are	shown	net	of	insurance	premium	refunds.	Insurance	premiums	written	exclude	value	added	
      taxation.
      Unearned insurance premiums
	     I
      	n	terms	of	the	Housing	Consumers	Protection	Measures	Act	(Act	No.95	of	1998),	the	Council	shall	provide	a	warranty	
      to	housing	consumers	for	a	maximum	period	of	five	years	from	the	date	of	occupation.		Insurance	premiums	are	earned	
      over	the	period	of	the	policy	commensurate	with	the	expected	incidence	of	risk.	In	reaching	its	assessment	of	the	pattern	
      of	 risk	 the	 Council	 makes	 reference	 to	 past	 insurance	 claims	 experience.	 Unearned	 insurance	 premiums	 represent	 the	
      proportion	of	insurance	premiums	written	that	is	held	to	cover	expenses,	claims	and	profits	attributable	for	future	years	
      of warranty cover.
	     I
      	n	 determining	 the	 unearned	 premium	 provision,	 initial	 expenses	 are	 deducted	 from	 the	 enrolment	 fee.	 The	 remaining	
      portion	of	the	enrolment	fee	is	assumed	to	be	earned	over	the	life	of	the	policy	in	accordance	with	the	earnings	curve.	Initial	
      expenses	are	earned	uniformly	over	two	quarters.	The	unearned	premium	provision	includes	an	allowance	for	the	future	
      release	of	profits.
      Insurance claims incurred
	     	nsurance	claims	incurred,	comprise	insurance	claims	and	related	expenses	paid	in	the	year	and	changes	in	the	outstanding	
      I
      claims	provision,	including	provisions	for	insurance	claims	incurred	but	not	reported	and	related	expenses,	together	with	any	
      other	adjustments	to	insurance	claims	from	previous	years.		Insurance	claims	are	typically	reported	relatively	quickly	after	the	
      insurance	claims	event	and	are	therefore	subject	to	significantly	less	uncertainty	than	future	insurance	claims	events.
      I
      	nsurance	claims	outstanding	represent	the	cost	of	settling	all	insurance	claims	arising	from	events	that	have	occurred	up	
      to the balance sheet date, including the provision for insurance claims incurred but not reported, less any amounts paid in
      respect of those insurance claims.
	     I
      	n	estimating	the	cost	of	notified	but	not	paid	insurance	claims,	the	Council	has	regard	to	the	insurance	claim	circumstances	
      as	reported.		Basic	chain	ladder	techniques	are	applied	to	project	outstanding	remedial	work	payments	for	each	complaint	
      period. The difference between the ultimate claims and the claims paid to date produced a result which includes both the
      “Incurred	But	Not	Reported”	and	“Notified	Outstanding	Claims”	provisions.




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     1.4      Insurance technical result (CONTINUED)
              Unexpired risk provisions
     	        A
              	 n	 unexpired	 risk	 provision	 is	 made	 where	 the	 estimated	 cost	 of	 insurance	 claims,	 related	 expenses	 and	 deferred	
              acquisition	costs	exceed	unearned	insurance	premiums,	after	taking	account	of	future	investment	income.	An	assessment	
              is	made	at	the	year-end	for	the	estimated	cost	of	insurance	claims,	which	will	arise	during	the	unexpired	terms	of	policies	
              in	force	at	the	balance	sheet	date.		The	estimated	cost	of	insurance	claims	includes	expenses	to	be	incurred	in	settling	
              insurance claims.
              The provisions are inevitably subject to inherent uncertainties because of the range of factors, which could give rise to
              potentially	 significant	 insurance	 claims	 over	 the	 five-year	 period	 covered	 by	 the	 “unexpired	 risk	 provision”.	 	 The	 time	
              expected	to	elapse	between	the	inceptions	of	policies,	the	manifestation	of	events	giving	rise	to	insurance	claims,	and	the	
              notification	to	and	settlement	by	the	Council	of	such	insurance	claims	accentuate	these	uncertainties.
     	        	n	calculating	the	estimated	cost	of	future	insurance	claims,	actuarial	and	statistical	projections	of	the	frequency	and	severity	
              I
              of	 future	 insurance	 claims	 events	 are	 used	 to	 project	 ultimate	 settlement	 costs.	 Such	 projections	 are	 based	 on	 current	
              facts	 and	 circumstances.	 Due	 to	 inherent	 uncertainties	 a	 significant	 degree	 of	 caution	 has	 been	 included	 in	 exercising	
              the	judgement	required	for	setting	the	unexpired	risk	provision	at	a	level	such	that	the	Council	is	confident	that	it	is	not	
              understated.
              Given	the	inherent	uncertainty	in	estimating	the	cost	of	future	insurance	claims,	it	is	likely	that	the	final	outcome	will	prove	to	
              be different from the estimate established at the balance sheet date. Any consequential adjustments to amounts previously
              reported	will	be	reflected	in	the	results	of	the	year	in	which	they	are	identified.
              Liability adequacy test
              The solvency of the warranty fund is tested annually by an independent actuarial service company. The assessment is to
              confirm	the	solvency	of	the	organisation	and	its	ability	to	meet	its	future	obligations.		The	results	of	the	actuarial	valuation	
              indicated	that	the	NHBRC	as	a	whole,	including	both	subsidy	and	non-subsidy	houses,	is	solvent	and	able	to	fund	its	liabilities	
              on	a	run-off	basis.		The	change	in	mix	of	business	between	subsidy	and	non-subsidy	houses	and	enrolment	fee	structures	
              will	in	future	determine	the	solvency	position	of	the	NHBRC.


     1.5      Revenue recognition
     	        R
              	 evenue	arising	from	registration,	renewal,	late	enrolment,	document	sales,	technical	services	and	subsidy	project	enrolments	
              fees	are	recognised	on	the	accrual	basis.	Revenue	from	the	sale	of	goods	and	service	are	recognised	when	significant	risks	
              and rewards of ownership have been transferred to the buyer.
     	        I
              	nterest	income	is	accrued	on	a	time	proportion	basis,	taking	into	account	the	principal	outstanding	amount	and	the	effective	
              interest rate over the period to maturity.


     1.6      Irregular, unauthorised, fruitless and wasteful expenditure
     	        I
              	rregular	 expenditure	 means	 expenditure	 incurred	 in	 contravention	 of,	 or	 not	 in	 accordance	 with,	 a	 requirement	 of	 any	
              applicable	legislation,	including	the	PFMA,	or	any	legislation	providing	for	procurement	procedures	in	Government.
     	        U
              	 nauthorised	expenditure	is	expenditure	that	has	not	been	budgeted,	expenditure	that	is	not	in	terms	of	the	conditions	of	
              an	allocation	received	from	another	sphere	of	Government	or	organ	of	state	and	expenditure	in	the	form	of	a	grant	that	is	
              not	permitted	in	terms	of	the	PFMA.
              Fruitless	and	wasteful	expenditure	means	expenditure	that	was	made	in	vain	and	could	have	been	avoided	had	reasonable	
              care	been	exercised.
     	        	 ll	 irregular,	 unauthorised,	 fruitless	 and	 wasteful	 expenditure	 is	 accounted	 for	 as	 expenditure	 in	 the	 statement	 of	
              A
              financial	performance	and	where	recovered,	it	is	subsequently	accounted	for	as	revenue	in	the	statement	of	financial	
              performance.


     1.7      Taxation
     	        N
              	 o	provision	has	been	made	for	South	African	Normal	Tax	as	the	Council	has	been	granted	exemption	in	term	of	Section	10	
              (1)	(cA)	(i)	of	the	Income	Tax	Act	No.58	of	1962.


     1.8      Property, plant and equipment
     	        P
              	 roperty,	plant	and	equipment	are	tangible	assets	that	are	held	for	use	in	the	production	or	supply	of	goods	or	services,	for	
              rental	to	others,	or	for	administrative	purposes,	and	are	expected	to	be	used	during	more	than	one	period.




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	      I
       	tems	of	property	plant	and	equipment	are	initially	recognised	at	cost,	being	the	cash	price	equivalent	at	the	recognition	
       date.	Expenditure	on	additions	and	improvements	to	property,	plant	and	equipment	including	the	cost	of	related	interest	
       is	capitalised	as	the	expenditure	is	incurred.	Subsequent	to	initial	recognition,	items	of	property	plant	and	equipment	are	
       measured at cost less accumulated depreciation and any accumulated impairment losses.
       Change in useful lives
	      M
       	 anagement	re-assessed	the	useful	lives	of	computer	equipment	and	office	furniture.		The	estimated	useful	lives	were	not	revised.
       Depreciation	is	charged	to	surplus	or	deficit	so	as	to	allocate	the	cost	of	assets	less	their	residual	values	over	their	estimated	
       useful lives, using the straight-line method. The following rates are used for the depreciation of property, plant and
       equipment:

        Computer	equipment                             25.0%	p.a

        Office	furniture                               		8.3%	p.a

        Office	Equipment                               16.7%	p.a

        Motor vehicles                                 20.0%	p.a

        Buildings                                      		5.0%	p.a


       Land is not depreciated
       The residual values, useful lives and economic consumption patterns for all items of property, plant and equipment are
       reviewed annually and, if necessary, the consequent depreciable amounts, rates and methods are adjusted at each balance
       sheet	date.	Any	changes	are	accounted	for	as	changes	in	accounting	estimates	and	included	in	surplus	or	deficit	for	the	
       current and future periods by adjusting the relevant future depreciation charges.
       The gain or loss arising from the disposal or retirement of an asset is determined by deducting the carrying value from the
       proceeds	on	the	date	of	disposal	and	are	included	in	surplus	or	deficit.


1.9    Intangible assets
	      T
       	 he	intangible	assets	are	purchased	and	have	a	finite	life.		Amortisation	is	recorded	by	a	charge	to	income	computed	on	the	
       straight-line basis, after adjusting for residual value at the end of their useful life, so as to write-off the cost of the assets over
       their	expected	useful	lives.	The	following	rates	are	used	for	the	amortisation	of	intangible	assets:


        Computer	software                              20.0%	p.a



1.10   Impairment
       The carrying values of assets are reviewed at each balance sheet date to assess whether there is any indication of impairment.
       If	 any	 such	 indication	 exists,	 the	 recoverable	 amount	 of	 the	 asset	 is	 estimated	 in	 order	 to	 determine	 the	 extent	 of	 the	
       impairment.	Where	the	carrying	value	exceeds	the	estimated	recoverable	amount,	such	assets	are	written	down	to	their	
       estimated recoverable amount.
	      Impairment	losses	are	recognised	as	an	expense	in	the	statement	of	financial	performance.
       Where	it	is	not	possible	to	estimate	the	recoverable	amount	for	an	individual	asset,	the	recoverable	amount	is	determined	
       for the cash-generating unit to which the asset belongs.
	      W
       	 here	an	impairment	loss	subsequently	reverses,	the	carrying	amount	of	the	asset	is	increased	to	the	revised	estimate	of	
       its	recoverable	amount,	but	so	that	the	increased	carrying	amount	does	not	exceed	the	carrying	amount	that	would	have	
       been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is
       recognised as income.


1.11   Inventories
	      I
       	nventories	are	initially	measured	at	cost	and	subsequently	written	down	to	the	lower	of	cost	and	estimated	net	realisable	
       value.		Any	write-down	is	recognised	in	surplus	or	deficit.		Cost	is	calculated	using	the	first-in-first-out	method	and	comprises	
       direct purchase costs. Estimated net realisable value is the estimated selling price in the ordinary course of business, less any
       costs to be incurred in distribution.




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     1.12     Financial instruments
              Significant	accounting	policies	and	methods	adopted,	including	the	criteria	for	recognition,	the	basis	of	measurement	and	
              the	basis	on	which	income	and	expenses	are	recognised,	in	respect	of	each	class	of	financial	asset,	financial	liability	and	
              equity instrument are disclosed below:
              Financial assets
     	        	nvestments	are	recognised	and	derecognised	on	trade	date	where	the	purchase	or	sale	of	an	investment	is	under	a	contract	
              I
              whose	terms	require	delivery	of	the	investment	within	the	timeframe	established	by	the	market	concerned,	and	are	initially	
              measured at fair value, plus transaction costs.
     	        	 inancial	 assets	 are	 classified	 into	 the	 following	 specified	 categories:	 held-to-maturity,	 available-for-sale	 and	 loans	 and	
              F
              receivables.	The	classification	depends	on	the	nature	and	purpose	of	the	financial	assets	and	is	determined	at	the	time	of	
              initial recognition.
              Effective interest method
     	        	 he	effective	interest	method	is	a	method	of	calculating	the	amortised	cost	of	a	financial	asset	and	of	allocating	interest	
              T
              income	over	the	relevant	period.		The	effective	interest	rate	is	the	rate	that	discounts	estimated	future	cash	receipts	(including	
              all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other
              premiums	or	discounts)	through	the	expected	life	of	the	financial	asset,	or,	where	appropriate,	a	shorter	period.	Income	is	
              recognised on an effective interest basis for debt instruments.
              Held-to-maturity investments
     	        B
              	 ills	of	exchange	and	debentures	with	fixed	or	determinable	payments	and	fixed	maturity	dates	that	the	Council	has	the	
              positive	intent	and	ability	to	hold	to	maturity	are	classified	as	held-to-maturity	investments.	Held-to-maturity	investments	are	
              initially recorded at fair value, and subsequently at amortised cost using the effective interest method less any impairment,
              with revenue recognised on an effective yield basis.
              Available For Sale (“AFS”)
     	        U
              	 nlisted	shares	and	listed	redeemable	notes,	traded	in	an	active	market	are	classified	as	being	AFS	and	are	stated	at	fair	
              value.		Fair	value	is	determined	in	the	manner	described	in	note	25.	Gains	arising	from	changes	in	fair	value	are	recognised	
              directly	in	equity	as	a	non-distributable	reserve.	Impairment	losses	are	recognised	directly	in	surplus	or	loss.		
     	        W
              	 here	the	investment	is	disposed	of	or	is	determined	to	be	impaired,	the	cumulative	gain	or	loss	previously	recognised	in	
              the	non-distributable	reserve	is	included	in	surplus	or	deficit	for	the	period.
              Loans and receivables
     	        	 rade	receivables,	and	other	receivables	that	have	fixed	or	determinable	payments	that	are	not	quoted	in	an	active	market	
              T
              are	classified	as	loans	and	receivables.	Loans	and	receivables	are	measured	at	amortised	cost	using	the	effective	interest	
              method,	less	any	impairment.	Interest	income	is	recognised	by	applying	the	effective	interest	rate,	except	for	short-term	
              receivables when the recognition of interest would be immaterial.
              Impairment of financial assets
     	        F
              	 inancial	assets	are	assessed	for	indicators	of	impairment	at	each	balance	sheet	date.	For	unlisted	shares	classified	as	AFS,	
              a	significant	or	prolonged	decline	in	the	fair	value	of	the	security	below	its	cost	is	considered	to	be	objective	evidence	of	
              impairment.	For	all	other	financial	assets,	including	AFS,	objective	evidence	of	impairment	could	include:
     	        •	   significant	financial	difficulty	of	the	issuer	or	counterparty;	or
     	        •	   default	or	delinquency	in	interest	or	principal	payments;	or
     	        •	   it	becoming	probable	that	the	borrower	will	enter	bankruptcy	or	financial	re-organisation.
              For	certain	categories	of	financial	assets,	such	as	trade	receivables,	assets	that	are	assessed	not	to	be	impaired	individually	
              are subsequently assessed for impairment on a collective basis.
              For	financial	assets	carried	at	amortised	cost,	the	amount	of	the	impairment	is	the	difference	between	the	asset’s	carrying	amount	
              and	the	present	value	of	estimated	future	cash	flows,	discounted	at	the	financial	asset’s	original	effective	interest	rate.
     	        T
              	 he	carrying	amount	of	the	financial	asset	is	reduced	by	the	impairment	loss	directly	for	all	financial	assets	with	the	exception	
              of	 trade	 receivables,	 where	 the	 carrying	 amount	 is	 reduced	 through	 the	 use	 of	 an	 allowance	 account.	 When	 a	 trade	
              receivable	 is	 considered	 uncollectible,	 it	 is	 written	 off	 against	 the	 allowance	 account.	 Subsequent	 recoveries	 of	 amounts	
              previously	written	off	are	credited	against	the	allowance	account.	Changes	in	the	carrying	amount	of	the	allowance	account	
              are	recognised	in	surplus	or	deficit.
     	        W
              	 ith	the	exception	of	AFS	equity	instruments,	if,	in	a	subsequent	period,	the	amount	of	the	impairment	loss	decreases	and	
              the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised
              impairment	loss	is	reversed	through	surplus	or	deficit	to	the	extent	that	the	carrying	amount	of	the	investment	at	the	date	the	
              impairment	is	reversed	does	not	exceed	what	the	amortised	cost	would	have	been	had	the	impairment	not	been	recognised.
              In	respect	of	AFS	equity	securities,	impairment	losses	previously	recognised	through	profit	or	loss	are	not	reversed	through	
              profit	or	loss.	Any	increase	in	fair	value	subsequent	to	an	impairment	loss	is	recognised	directly	in	equity.



78   NHBRC ANNuAl REpORT 2011/2012
                                                                                                          NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                                Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



       Derecognition of financial assets
	      F
       	 inancial	assets	are	derecognised	when	the	contractual	rights	to	the	cash	flows	from	that	asset	expire;	or	it	transfers	the	
       financial	asset	and	substantially	all	the	risks	and	rewards	of	ownership	of	the	asset	to	another	entity.	Where	the	risks	and	
       rewards of ownership are not transferred or retained continue to control the transferred asset, the retained interest in the
       asset	and	the	associated	liabilities	are	recognised.	Where	risks	and	rewards	of	ownership	are	retained,	the	financial	asset	and	
       a collateralised borrowing are recognised.


       Financial liabilities
       Financial liabilities are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured
       at	 amortised	 cost	 using	 the	 effective	 interest	 method,	 with	 interest	 expense	 recognised	 on	 an	 effective	 yield	 basis.	 The	
       effective	 interest	 method	 is	 a	 method	 of	 calculating	 the	 amortised	 cost	 of	 a	 financial	 liability	 and	 of	 allocating	 interest	
       expense	 over	 the	 relevant	 period.	 The	 effective	 interest	 rate	 is	 the	 rate	 that	 discounts	 estimated	 future	 cash	 payments	
       through	the	expected	life	of	the	financial	liability,	or,	where	appropriate,	a	shorter	period.		
       Derecognition of financial liabilities
	      Financial	liabilities	are	derecognised	when,	and	only	when,	the	obligations	are	discharged,	cancelled	or	they	have	expired.


1.13   Cash and cash equivalents
	      For	the	purposes	of	the	cash	flow	statement,	cash	includes	cash	on	hand	and	short-term	bank	deposits.


1.14   Leased assets
	      R
       	 entals	payable	under	operating	leases	are	charged	to	surplus	or	deficit	on	a	straight-line	basis	over	the	term	of	the	relevant	
       lease.		Benefits	received	and	receivable	as	an	incentive	to	enter	into	an	operating	lease	are	also	spread	on	a	straight-line	basis	
       over the lease term.


1.15   Investments
       Investments	 are	 made	 in	 terms	 of	 an	 approved	 investment	 policy	 and	 investment	 strategy	 approved	 by	 the	 accounting	
       authority	in	terms	of	Treasury	Regulation	31.3.1	and	31.3.2.


1.16   Value Added Tax
       No	provision	has	been	made	for	Value	Added	Taxation	as	the	Council	was	deregistered	as	a	vat	vendor	on	01	April	2011	in	
       terms	of	the	Revenue	Laws	Amendment	Acts	Nos.	45	of	2003	and	32	of	2004	which	came	into	operation	on	01	April	2005.


1.17   Critical accounting judgements and key sources of estimation uncertainty
	      C
       	 ertain	 critical	 accounting	 policies	 require	 the	 use	 of	 judgement	 in	 their	 application	 or	 require	 estimates	 of	 inherently	
       uncertain	 matters.	 Listed	 below	 are	 those	 policies	 that	 the	 Council	 believe	 are	 critical	 and	 require	 the	 use	 of	 complex	
       judgement in their application.
       Insurance technical result
	      T
       	 he	accounting	for	the	insurance	technical	result	as	disclosed	in	note	1.4	requires	the	Council	to	make	certain	assumptions	
                                                                                                                                                	
       that	 have	 a	 significant	 impact	 on	 the	 revenues,	 expenses	 and	 liabilities	 that	 are	 recorded	 for	 these	 insurance	 premiums.	
       The	expected	impact	as	recorded	in	note	10	are	based	on	historical	performances,	current	and	long-term	outlooks	and	the	
       actuarial statistics compiled and updated by the actuarial industry on an ongoing basis.
       Plant and equipment
	      R
       	 esidual	values	and	estimated	useful	lives	are	assessed	on	an	annual	basis.	The	residual	values	of	vehicles	are	estimated	on	
       published second hand vehicle values as well as trading history. The residual values of all other assets are estimated to be
       zero.




                                                                                                                        NHBRC ANNuAl REpORT 2011/2012   79
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     2.      Property, plant and equipment


                                                Computer              Office      Motor           Land        Buildings            Total
                                               equipment           furniture     vehicles
                                                                        and
                                                                 equipment
                                                            R              R            R             R                R               R


     Year ended 31 March 2012
     Opening	net	book	amount                       3,397,278      	8,451,125	    	247,593	   	1,453,947	   	22,408,136	     	35,958,079	
     Additions                                     	3,210,890	    	1,616,044	    	337,945	            -                -     	5,164,879	
     Disposals                                	(1,096,318)        	(346,633)             -            -                -    	(1,442,951)
     Depreciation on disposal                       	689,013	       	195,970	            -            -                -        884,983
     Depreciation charge                      	(1,586,872)       	(1,105,054)    	(99,647)            -    	(1,061,046)     	(3,852,619)
     Closing	net	book	amount                       4,613,991      	8,811,452	    	485,891	   	1,453,947	   	21,347,090	      36,712,371


     At 31 March 2012
     Cost	                                    	20,395,070	       	17,307,734	    893,391     	1,453,947	   	25,505,793	     	65,555,936	
     Accumulated depreciation                	(15,781,079)       	(8,496,282)   	(407,501)            -    	(4,158,703)    	(28,843,565)
     Net	book	amount                               4,613,991      	8,811,452	    	485,890	   	1,453,947	   	21,347,090	      36,712,371
                                                                            -
     Year ended 31 March 2011
     Opening	net	book	amount                       	4,087,612	    8,848,478       	58,194	   	1,453,947	   	23,426,953	     	37,875,184	
     Additions                                     	1,992,525	    	1,170,988	    	232,100	            -          44,832       	3,440,445	
     Disposals                                	(6,334,181)       	(1,151,511)            -            -                -    	(7,485,692)
     Depreciation on disposal                      	6,311,049	    	1,142,645	            -            -                -     	7,453,694	
     Depreciation charge                      	(2,659,727)       	(1,559,475)    	(42,701)            -    	(1,063,649)     	(5,325,552)
     Closing	net	book	amount                       3,397,278      	8,451,125	    	247,593	   	1,453,947	   	22,408,136	     	35,958,079	


     At 31 March 2011
     Cost	                                    	18,280,498	       	16,038,323	    	555,447	   	1,453,947	   	25,505,793	     	61,834,008	
     Accumulated depreciation                	(14,883,220)       	(7,587,198)   	(307,853)            -    	(3,097,657)    	(25,875,929)
     Net	book	amount                               3,397,278      	8,451,125	    	247,593	   	1,453,947	   	22,408,136	     	35,958,079	



     Land
     Land	comprises	of	ERF’s	situated	in	Soshanguve	A	Township,	Registration	Division	JR,	Province	of	Gauteng;	under	General	Plan	No.	
     A9923/1996	and	held	by	Certificate	of	Registered	Title	No.	T4866/1997.		The	register	of	land	is	available	at	the	Council’s	premises.	


     Buildings
     Buildings	comprise	of	show	houses,	a	training	centre	and	a	conference	centre	at	the	Eric	Molobi	Housing	Innovation	Hub.	The	Hub	
     was	established	towards	the	end	of	2005	at	Thorntree	View,	Soshanguve	A,	in	the	Tshwane	Metropolitan	Municipality	in	Gauteng.	


     Useful lives
     The	residual	values	and	estimated	useful	lives	are	reflected	under	“Critical	accounting	judgements	and	key	sources	of	estimation	
     uncertainty”	(note	1.8	and	1.9)	in	the	summary	of	significant	accounting	policies.




80   NHBRC ANNuAl REpORT 2011/2012
                                                                                              NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                         Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



3.      Intangible assets


                                                                                Computer software                               Total
                                                                                                    R                                R


Year ended 31 March 2012
Opening	net	book	amount                                                                  	22,552,514	                   	22,552,514	
Additions                                                                                    	94,304	                        	94,304	
Disposals                                                                                    	(4,500)                        	(4,500)
Amortisation on disposals                                                                      	4,500	                         	4,500	
Amortisation charge                                                                    	(11,274,056)                  	(11,274,056)
Closing	net	book	amount                                                                  11,372,762                      11,372,762


At 31 March 2012
Cost	                                                                                    	56,931,838	                    56,931,838
Accumulated amortisation                                                               	(45,559,076)                  	(45,559,076)
Net	book	amount                                                                          11,372,762                      11,372,762


Year ended 31 March 2011
Opening	net	book	amount                                                                  	33,906,332	                   	33,906,332	
Additions                                                                                            -                                -
Disposals                                                                                	(2,985,413)                   	(2,985,413)
Amortisation disposal                                                                     	2,985,413	                    	2,985,413	
Amortisation charge                                                                    	(11,353,818)                  	(11,353,818)
Closing	net	book	amount                                                                  	22,552,514	                   	22,552,514	


At 31 March 2011
Cost	                                                                                    	60,498,516	                   	60,498,516	
Accumulated amortisation as previously reported                                        	(37,946,002)                  	(37,946,002)


Net	book	amount                                                                          	22,552,514	                   	22,552,514	


Impairment
The carrying value of the assets are reviewed at each balance sheet date to assess whether there is any indication of impairment.
If	any	such	indication	exists,	the	recoverable	amount	of	the	asset	is	estimated.




                                                                                                           NHBRC ANNuAl REpORT 2011/2012    81
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     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     4.      Investments
     	       	nvestments	represent	investments	in	cash,	listed	bonds,	securities	and	equities,	which	generate	interest	and	dividend	income	
             I
             and	trading	gains/losses.

                                                                                                                                Restated
                                                                                                         2012                       2011
                                                                                                            R                           R

     Available-for-sale investments carried at fair value comprise the following:

     Cash	investments                                                                         	2,031,002,393	             	1,866,709,556	
     Listed bond securities and equity
     -	Short-term	<	7	years                                                                     	151,283,489	               	317,932,557	
     - Medium-term 7 to 12 years                                                                 111,369,642                	132,455,150	
     -	Long-term	>	12	years                                                                     	569,835,395	               	175,317,825	
     -	Inflation-linked	bonds,	equity	and	derivatives                                           	364,229,209	               626,426,624
                                                                                              	3,227,720,128	             3,118,841,712


     Derivative	Financial	Instruments                                                           	465,928,845	                            -
                                                                                               3,693,648,973              3,118,841,712


     Non-current	portion                                                                      	1,662,646,580	             	1,252,132,156	
     Current	portion                                                                          	2,031,002,393	             	1,866,709,556	
     Total                                                                                     3,693,648,973              3,118,841,712
     None	of	these	financial	assets	are	either	past	due	or	impaired


     Reconciliation of opening and closing balance
     Opening balance                                                                           3,118,841,712              	2,934,899,305	
     Additions                                                                                 2,688,143,687              	2,447,028,933	
     Interest	accrued                                                                           	195,822,583	               	202,403,052	
     Disposals                                                                               	(2,687,399,927)           	(2,446,724,645)
     Capital	Additions/(Withdrawals)                                                            	335,000,000	               	(80,000,000)
     Administration fee                                                                          	(9,309,229)                	(8,900,462)
     Fair	value	(loss)/gain	on	available-for-sale	investments                                    	52,550,146	                	70,135,529	
                                                                                               3,693,648,973              3,118,841,712


     A	fair	value	gain	of	R52	550	146	(2011:	gain	of	R70	135	529)	was	processed	directly	in	equity	during	the	year.	The	fair	value	
     adjustment	increased	the	carrying	value	of	the	investments	to	equal	the	market	value	as	at	31	March	2012.	Details	of	investments	
     are	available	at	the	registered	office	of	the	NHBRC	for	inspection.


     4.1 Credit quality of financial assets
     The	credit	quality	of	financial	assets	that	are	neither	past	due	nor	impaired	can	be	assessed	by	reference	to	external	credit	ratings	
     or to historical information about counterparty default rates.


     Trade receivables
     Counterparty	with	external	credit	rating	(S	&	P)
     A                                                                                           	67,587,282	                	60,589,406	
     Total unimpaired trade receivables                                                          	67,587,282	                	60,589,406	
     Note:	the	customer	is	the	National	and	Provincial	Department	of	Human	Settlements	




82   NHBRC ANNuAl REpORT 2011/2012
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                                                          Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



                                                                                                                               Restated
                                                                                                   2012                             2011
                                                                                                        R                               R
4.1 Credit quality of financial Assets (continued)
The	credit	quality	of	financial	assets	that	are	neither	past	due	nor	impaired	can	be	assessed	by	reference	to	external	credit	ratings	
or to historical information about counterparty default rates.


Available for sale financial assets
(Bonds,	Money	Market,	Equities	and	Structured	Products)
Fitch
F1                                                                                        	168,226,820	                   	100,757,706	
F2                                                                                            4,117,861                                  -
F1+                                                                                     	1,934,019,518	                	1,715,364,724	
BB-                                                                                          	7,830,416	                     	7,699,032	
A                                                                                            	4,840,247	                   	10,023,698	
A-                                                                                           	5,219,099	                     	1,405,208	
A+                                                                                          	19,621,527	                      8,921,884
AA                                                                                          96,227,311                     	58,042,134	
AA-                                                                                         	72,107,164	                   	37,609,011	
AA+                                                                                       	239,571,395	                   	176,392,608	
AAA                                                                                       	470,558,860	                    418,838,842
BBB                                                                                       	234,622,545	                   	170,600,968	
                                                                                        	3,256,962,764	                	2,705,655,816	
S&P
AA+                                                                                          	2,503,545	                                 -
AAA                                                                                         	22,953,675	                   	23,370,890	
                                                                                            	25,457,220	                   	23,370,890	
Moody
A1                                                                                           	7,925,335	                      7,943,319
A2                                                                                          	10,775,996	                     	2,578,991	
                                                                                                        -                    	2,146,403	
Aa2                                                                                          	9,071,539	                   	15,454,187	
Aa3                                                                                           6,721,641                      	3,080,195	
Aaa                                                                                         12,843,338                     	23,434,579	
                                                                                            47,337,849                     	54,637,674	


Issuer Rated
A                                                                                           12,192,918
AA                                                                                            8,239,614                    	10,859,144	
                                                                                            	20,432,532	                   	10,859,144	


                                                                                         3,694,961,329                 	3,120,105,356	

The	total	available	for	sale	investments	are	disclosed	inclusive	the	management	fee	accrual	R1	312	356,	(2011:R1	263	644).




                                                                                                              NHBRC ANNuAl REpORT 2011/2012    83
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     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




                                                                                                         2012                    Restated
                                                                                                             R                       2011
                                                                                                                                         R
     5. Inventories
     Builders	manuals	at	cost                                                                        	394,530	                   	120,264	


     6. Trade and other receivables
     	Net	trade	receivables	                                                                      	54,147,959	                	30,838,395	
     - Trade receivables                                                                          	67,587,282	                	60,589,406	
     - Less provision for impairment                                                            	(13,439,323)                	(29,751,011)
     Other receivables:
     - Deposits                                                                                       124,237                             -
     	-	Staff	loans	                                                                                          -                    	15,070	
     	-	Sundry	debtors                                                                             	4,855,397	                 	4,752,876	
                                                                                                  	59,127,592	                	35,606,341	


     The fair values of trade and other receivables are as follows:
     Trade receivables                                                                            	67,587,282	                	60,589,406	
     Deposits                                                                                         124,237
     	Staff	loans	                                                                                            -                    	15,070	
                                                                                                  	67,711,519	                	60,604,476	
     Ageing of past due but not impaired is as follows:
     	Amounts	in	90	to	120	days	                                                                   	4,725,407	                   	409,141	
     	Amounts	in	120	days	+	                                                                      	13,409,323	                	15,361,748	
                                                                                                  	18,134,730	                	15,770,889	


     Movements on the provision for impairment of trade
     receivables is as follows:
     At	01	April	                                                                               	(29,751,011)                	(12,605,997)
     Provision	for	receivables	impairment                                                                     -              	(17,145,014)	
     Unused amounts reversed                                                                      16,311,688                              -
     At 31 March                                                                                	(13,439,323)                	(29,751,011)


     In	determining	the	recoverability	of	a	trade	receivables,	the	NHBRC	considers	any	change	in	the	credit	quality	of	the	trade	receivable	
     from	the	date	credit	was	initially	granted	up	to	the	reporting	date.	The	concentration	of	credit	risk	is	high	due	to	the	customer	base	
     being provincial human settlement departments.




84   NHBRC ANNuAl REpORT 2011/2012
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                                                           Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



                                                                                                                               Restated
                                                                                                            2012                     2011
                                                                                                                 R                       R
7. Cash and cash equivalents

Cash	balances	                                                                                      	43,024,034	          	354,209,860	

Short-term	bank	deposits                                                                                  26,938                  46,887

                                                                                                    	43,050,972	          	354,256,747	


8. Emerging contractor reserve
The reserve was established to develop programmes to assist home builders, through training and inspection, to achieve and to
maintain	satisfactory	technical	standards	of	home	building	in	terms	of	Section	3(h)	of	the	Housing	Consumers	Protection	Measures	
Act	(Act	No.95	of	1998).	The	emerging	contractor	reserve	has	been	established,	with	Ministerial	approval,	to	develop	programmes	
targeted	at	the	empowerment	of	emerging	home	builders	registered	with	the	NHBRC,	which	will	enable	learners	to	be	able	to	start	
and	manage	their	own	construction	contracting	businesses.	The	Council	utilised	R5	403	657	(2011:	R7	304	512)	for	home	builder	
training	in	the	current	financial	year.	


9. Non-distributable reserve
The	non-distributable	reserve	relates	to	unrealised	gains/losses		on	available	for	sale	investments.	This	reserve	is	not	substantiated	
by	cash	reserves,	which	makes	it	inaccessible	to	the	NHBRC.


10. Technical liabilities
                                                        Outstanding             Unearned             Unexpired                      Total
                                                              claims             premium                   risk
                                                                     R                    R                      R                       R


Balance at 31 March 2010                                  	72,606,049	       	430,492,802	         319,894,396             822,993,247
Increase	during	the	year	(note	18)                        	11,542,190	                     -                      -         	11,542,190	
Utilised	during	the	year	(note	18)                      	(22,269,995)                      -                      -       	(22,269,995)
(Decrease)	increase	during	the	year	(note	13)                         -     	(127,417,401)        	102,790,831	           	(24,626,570)
Balance	at	31	March	2011                                  61,878,244         	303,075,401	        	422,685,227	            787,638,872
Increase	during	the	year	(note	18)                         	5,255,613	                     -                      -           	5,255,613	
Utilised	during	the	year	(note	18)                      	(15,374,821)                      -                      -       	(15,374,821)
(Decrease)	increase	during	the	year	(note	13)                         -        	19,405,981	        179,723,726            	199,129,707	
Balance at 31 March 2012                                  	51,759,036	        322,481,382         	602,408,953	            976,649,371




Balance at 31 March 2011
Current                                                   22,643,723         	187,626,450	                        -        	210,270,173	
Non-current                                               	39,234,521	       	115,448,951	        	422,685,227	            	577,368,699	
                                                          61,878,244         	303,075,401	        	422,685,227	            787,638,872
Balance at 31 March 2012
Current                                                   	19,942,440	        181,136,763                         -        	201,079,203	
Non-current                                               	31,816,596	        141,344,619         	602,408,953	            	775,570,168	
                                                          	51,759,036	        322,481,382          	602,408,953	           976,649,371




                                                                                                               NHBRC ANNuAl REpORT 2011/2012    85
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     10. Technical liabilities (continued)
     10.2 Basis and methodology of valuation
     Best	practice	actuarial	techniques	were	applied	to	value	the	insurance	liabilities	of	the	NHBRC	on	a	run-off	basis,	using	best	estimate	
     assumptions	per	general	practice	in	the	South	African	short-term	insurance	industry	and	IFRS	4.	
     The	Outstanding	Claims	Provision	(OCP)	is	determined	at	a	99.5%	sufficiency	level.	This	is	consistent	with	the	Financial	Services	
     Board’s	proposed	Financial	Condition	Reporting	requirements,	which	will	require	companies	to	hold	liabilities	at	the	75%	level,	and	
     capital	at	99.5%.	
     The	OCP	has	been	estimated	by	applying	chain	ladder	techniques	to	a	run-off	triangle	of	remedial	work	claims	paid	grouped	by	
     quarter	of	complaint.		The	Bornhuetter	Ferguson	(BF)	method	was	used	to	calculate	the	OCP,	as	this	method	was	most	suitable	to	
     the	data.	The	methodology	is	consistent	with	that	applied	in	the	prior	year.	The	OCP	includes	insurance	claims	incurred,	changes	in	
     outstanding claims provision, and provision for insurance claims incurred but not yet reported.
     The	Unearned	Premium	Provision	(UPP)	has	been	estimated	using	the	enrolment	fee	earnings	curve,	having	deducted	initial	expenses	
     which	are	assumed	to	be	earned	uniformly	over	the	first	two	quarters	following	the	enrolment	date	(estimated	period	between	
     enrolment	and	occupation	dates).	This	methodology	is	consistent	with	that	used	in	the	prior	year.
     The	unexpired	risk	provision	(URP)	is	the	sum	of	all	UPP’s	plus	any	additional	unexpired	risk	provision	(AURP)	that	may	be	required	
     if	the	unearned	premium	is	considered	to	be	inadequate	to	pay	for	the	unexpired	risks.


     10.3 Assumptions
     The basis of assumptions used are consistent with those used in the prior year valuation. The discount rate and inflation rates are
     consistent	with	the	market.	The	ultimate	complaint	rate	is	dependent	on	a	run-off	triangle	(historical	and	projected)	of	complaints.	
     Actuarial judgement was applied on setting other assumptions supported by internal data.


     Key assumption                                                 2012                                          2011

                                                     Non-subsidy             Subsidy              Non-subsidy              Subsidy

     Discount rate                                      6.52%                 6.52%                   7.6%                   7.6%
     General	price	inflation                            6.65%                 6.65%                   5.9%                   5.9%

     Future building cost inflation                     7.65%                 7.65%                   6.9%                   6.9%

     Historical	building	cost	inflation                 5.60%                   N/A                   5.2%                    N/A

     Ultimate complaint rate                            2.70%                 2.70%                   2.9%                   2.9%

     BF	complaints	loss	ratio                           2.55%                   N/A                   2.6%                    N/A

     Remedial	work	rate                                 2.00%                 2.00%                   2.0%                   2.0%

     Average claim cost                                R172,859               R30,178               R140,193               R30,294

     Initial	expense	ratio                              68.00%                52.00%                 79.0%                  73.0%

     BF	method	tail	factor                              10.00%                10.00%                 10.0%                  10.0%

     BF	method	loss	ratio                               2.50%                 2.50%                   2.5%                   2.5%

     Spread	of	risk	period                         Per	earnings	curve	                         Per	earnings	curve	
                                                    (of	complaints)                             (of	complaints)




86   NHBRC ANNuAl REpORT 2011/2012
                                                                                               NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                          Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



10.4 Sensitivity analysis
The	various	components	of	the	provisions	are	sensitive	to	various	factors.	The	UPP	is	mostly	driven	by	the	initial	expense	ratio	and	
the	earnings	curve.	The	sensitivity	to	the	earnings	curve	is	minimal	at	about	21%	of	non-subsidy	enrolments	and	27%	of	subsidy	
enrolments	from	2011/12	were	held	as	provision	and	spread	over	the	period	of	cover.	The	initial	expense	ratio	affects	the	current	
component	of	the	UPP	held	to	meet	inspection	costs	still	ongoing.	The	requirement	for	AURP	makes	the	total	provisions	insensitive	
to	the	initial	expense	ratio	(for	2011/12).	The	OCP	is	sensitive	to	the	net	real	discount	rates	and	the	BF	Tail	Factor.	The	AURP	is	
also	sensitive	to	the	net	real	discount	rate	in	addition	to	the	average	remedial	claim	amount,	the	remedial	work	rate,	the	ultimate	
complaint	rate,	and	to	a	lesser	extent	the	development	of	complaints	as	suggested	by	the	earnings	curve.	 	




                                                                                                  2012                            2011
                                                                                                      R                                R
11. Trade and other payables

Trade	payables	and	accrued	expenses                                                       	67,498,554	                   	23,194,059	

Operating lease accrual                                                                       628,862                      	1,995,958	

Income	received	in	advance	                                                               137,362,821                   	222,000,000
(KwaZulu-Natal	Rectification	Work)
Leave accrual                                                                               	9,285,630	                    	8,418,480	

Unidentified	receipts                                                                       	3,306,994	                    	5,815,003	

Cash	received	in	advance                                                                   23,481,286                    	30,965,600	

Value	Added	Taxation	payable                                                                           -                 	35,641,428	

Retentions                                                                                	10,198,030	                                 -

                                                                                         	251,762,176	                  	328,030,526	




The	NHBRC	has	financial	risk	management	policies	to	ensure	that	all	payables	are	paid	within	the	credit	timeframe.	Due	to	the	
short-term	nature	of	the	payables,	management	believes	that	the	carrying	amount	approximates	the	fair	value.


12. Provisions

                                                                Legal Fees                       Other                            Total

Balance	at	beginning	of	the	year                                	1,118,305                    250,593                       1,368,898

 - Utilised during the year                                    	(1,118,305)                  (250,593)                    (1,368,898)

		-	Raised	during	the	year	                                     	6,179,008	                 	7,189,105	                   13,368,113

Balance	at	31	March	2012                                        	6,179,008	                 	7,189,105	                   13,368,113



		-	Raised	during	the	year	                                     	1,053,305	                   	250,593	                    	1,303,898	

Balance	at	31	March	2011                                        	1,118,305	                   	250,593	                     1,368,898




                                                                                                            NHBRC ANNuAl REpORT 2011/2012    87
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




                                                                                                      Restated
                                                                                          2012             2011
                                                                                             R                R


     13. Insurance premium revenue
     Premium	received                                                             	426,804,051	    331,933,726
     Change	in	unearned	premium	provision	(see	note	10)                           	(19,405,981)    	127,417,401	
     Change	in	unexpired	risk	provision	(see	note	10)                            	(179,723,726)   	(102,790,831)
                                                                                  227,674,344      	356,560,296	


     14. Fee revenue
     Annual registration fees                                                        1,333,413       	2,082,391	
     Annual renewal fees                                                            	7,698,810	       8,317,167
     Registration	fees                                                              	2,094,285	      	2,710,734	
     Builder	manual	fees                                                               366,174         	603,112	
     Subsidy	project	enrolments	fees                                               	43,520,150	     	17,220,897	
     Late enrolment fees                                                              	212,606	        	602,351	
     Document sales                                                                   	760,819	         371,281
                                                                                   	55,986,257	     	31,907,933	


     15. Technical services revenue
     Forensic	audit,	Geo-tech	and	rectification	work                              	183,656,462	     	80,396,035	
                                                                                  	183,656,462	     	80,396,035	


     16. Investment income
     Investment	income	earned	on	financial	assets,	analysed	by	category	of	
     asset, is as follows:


     Income	from	available	for	sale	investments                                   	195,822,583	    	202,403,052	
     Income	from	loans	and	receivables	(cash	and	cash	equivalents)                  	1,534,991	        	719,004	
                                                                                  	197,357,574	    	203,122,056	


     17. Other income
     Sundry	income                                                                 	25,548,733	         881,299
     Movement in provision for doubtful debts                                       16,311,688                 -
     Legacy project income                                                             496,781                 -
     Penalties                                                                         	81,000	                -


     18. Insurance claims and loss adjustment expenses
     Current	year	warranty	claims                                                  	15,374,821	     	22,269,995	
     Decrease in the outstanding claims provision                                 	(10,119,208)    	(10,727,805)
                                                                                    	5,255,613	     	11,542,190	




88   NHBRC ANNuAl REpORT 2011/2012
                                                                                                  NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                             Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



                                                                                                                               Restated
                                                                                                    2012                             2011
                                                                                                         R                               R
19. Results from operating activities
Results	from	operating	activities	is	arrived	at	after	taking	into	
account the following:


Auditor’s remuneration                                                                        	3,252,806	                     	1,995,791	


Depreciation                                                                                  	3,852,620	                     	5,325,947	
			Computer	equipment                                                                         	1,586,872	                     	2,660,122	
			Office	furniture	and	equipment                                                             	1,105,055	                     	1,559,474	
  Motor vehicles                                                                                  99,647                          	42,701	
			Buildings                                                                                  	1,061,046	                     	1,063,650	


Amortisation of intangible assets                                                            	11,274,056	                   	11,353,818	


Net	loss/(profit)	on	disposal	of	property	plant	and	equipment                                   	140,025	                       	(15,591)


Emerging contractor training                                                                  	5,403,657	                     	7,304,512	


Rentals	in	respect	of	operating	leases                                                       	18,975,278	                   	14,525,067	


The	Council	leases	various	offices	under	non-cancellable	operating	
lease agreements. The leases have varying terms, escalation clauses and
renewal rights.


The future minimum lease payments are as follows:                                            16,616,628                     	23,144,581	
			Not	later	than	1	year                                                                     	13,290,621	                   	12,288,088	
			Later	than	1	year	and	not	later	than	5	years                                               	3,326,007	                   	10,856,493	


Salaries	and	related	costs                                                                  167,284,764                    154,608,389	


Directors’ emoluments                                                                          8,748,498                      	9,009,927	
Executive	directors
  For managerial services                                                                      7,436,411                      	7,830,705	
Non-executive	directors
  For services as directors                                                                   	1,312,087	                      1,179,222




20. Finance costs
Interest	paid	-	late	payments                                                                         575	                            255




                                                                                                               NHBRC ANNuAl REpORT 2011/2012    89
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




                                                                                                        Restated
                                                                                          2012              2011
                                                                                              R                 R
     21. Notes to the cash flow statement

     21.1 Cash (utilised in)/generated from operations

     Surplus	for	the	year                                                         	133,564,122	     	361,654,957	

     Adjustments for:

     Depreciation                                                                    	3,852,620	       	5,325,552	

     Amortisation                                                                  	11,274,056	       	11,353,818	

     Net	loss/(profit)	on	disposal	of	property	plant	and	equipment                    	140,025	          	(15,591)

     Realised	profit	on	sale	of	available-for-sale	investments                    	(17,955,244)    	(126,472,192)

     Fair	value	gain	on	financial	instruments                                     	(15,928,845)

     Increase	in	provisions                                                         11,999,216         	1,303,898	

     (Increase)/Decrease	in	technical	liabilities	                                	189,010,499	     	(13,084,380)

     Interest	paid                                                                         	575	             	255	

     Interest	received                                                           	(197,357,574)    	(203,122,057)
     Operating income before working capital changes                              	118,599,450	       	36,944,260	

     (Increase)	in	inventories                                                       	(274,265)         	(21,049)

     (Increase)/Decrease	in	trade	and	other	receivables                           	(23,521,251)       	12,513,678	

     (Decrease)/Increase	in	trade	and	other	payables                              	(76,268,350)     	207,410,644	

                                                                                   	18,535,584	     	256,847,533	


     21.2 Proceeds on disposal of property, plant and equipment
     Net	book	value                                                                   	557,968	           31,998

     Net	(loss)/gain	on	disposal	of	property	plant	and	equipment                     	(140,025)           	15,591	

                                                                                       417,943            	47,589	


     21.3 Proceeds on sale of financial assets
     Net	book	value                                                              	2,333,890,659	   	2,400,252,453	

     Realised	profit	on	sale	of	available-for-sale	investments                     	17,955,244	      126,472,192

     Fair	value	gain	on	financial	instruments                                      	15,928,845	                  -

                                                                                 2,367,774,748     	2,526,724,645	


     21.4 Cash and cash equivalents
     Cash	and	cash	equivalents	consist	of	cash	balances	and	short-term	bank	
     deposits.	Cash	and	cash	equivalents	included	in	the	cash	flow	statement	
     comprise the following amounts.
     (Loss)	profit	on	sale	of	financial	instruments
     Cash	on	hand	and	balances	with	banks
                                                                                   	43,050,972	     	354,256,747	




90   NHBRC ANNuAl REpORT 2011/2012
                                                                                      NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                 Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



                                               Fees      Cell phone      Subsistence                Total                Total
                                                         Allowance        and travel                2012                 2011
                                                   R                                R                    R                   R


22.     Remuneration
22.1 Total cost - Non-executive council
     members


S	Nene	2                                   	137,253	          	8,800	                -          	146,053	           	106,483	
S	De	Gois	   2
                                             12,362           	8,800	          	2,060	            23,222              33,676
C	Kadwa	    1
                                                   -                -                -                   -             	4,800	
A	Goliger	  2
                                           	175,002	          	8,800	         	30,817	          214,619               	98,410	
S	P	Hlahane	         3
                                             	75,551	         	8,800	          	8,158	           	92,509	           	113,660	
S	M	Maja-Masilo	             3
                                             	92,067	         	8,800	          28,737           	129,604	           	194,021	
V	C	Mehana	(Chairperson)	        3
                                           	359,942	          	8,800	           4,229           372,971               87,184
B	A	Mhlabeni	            3
                                           	159,406	          	8,800	         	34,170	          	202,376	            196,893
M	Mkhize	3                                   99,889           	8,800	         	22,044	          	130,733	            134,287
G	Seape	4                                          -                -                -                   -          	101,749	
T	D	Silinda	     6
                                                   -                -                -                   -          	108,059	
                                          1,111,472          	70,400	        	130,215	       	1,312,087	           1,179,222
1
    	Resigned	on	31	March	2009
2
    	Re-appointed	on	01	May	2009
3
    	Appointed	on	01	May	2009
4
    	Resigned	on	24	January	2011
5
    	Resigned	on	31	April	2010
6
    	Resigned	on	31	December	2010
                                            Salaries     Cell phone      Subsistence                Total                Total
                                                         Allowance        and travel                2012                 2011
                                                   R                                R                    R                   R
22.2 Total cost - Top management


S	Mashinini	(Chief	Executive	Officer)     	2,675,000	        	56,300	          16,694         2,747,994           	2,542,584	
                                          	2,675,000	        	56,300	          16,694         2,747,994           	2,542,584	




J	Mahachi	(Technical	and	Information	     	1,740,122	        	30,000	            	704	       	1,770,826	          	1,587,512	
Technology)
C	Thorp	(Chief	Financial	Officer)         	1,771,610	        	30,000	         	23,730	       	1,825,340	          	1,706,480	
T	Moshoeu	(Customer	Care)¹                         -                -                -                    -         	813,525	
L	Less	(Corporate	Services)	2	            	1,059,022	        	22,500	         	10,729	       	1,092,251	          	1,180,604	
                                          	4,570,754	        	82,500	         	35,163	        4,688,417           	5,288,121	


1
    Contract	expired	on	31	October	2010
2
    	Resigned	on	31	December	2011




                                                                                                   NHBRC ANNuAl REpORT 2011/2012    91
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




                                                                                                                                Restated
                                                                                                                 2012                  2011
                                                                                                                     R                     R
     22.    Remuneration (continued)
     22.4 Bonuses


     Executive Managers
     S	Mashinini	(Chief	Executive	Officer)                                                                           -               	60,000	

     J	Mahachi	(Technical	and	Information	Technology)                                                          	78,402	              28,771

     C	Thorp	(Chief	Financial	Officer)                                                                         	82,785	              	75,950	

     T	Moshoeu	(Customer	Care)                                                                                 	58,863	              	54,003	

     L	Less	(Corporate	Services)                                                                                     -               31,868

                                                                                                          	220,050	             	250,592	


     23.    Related Parties
     23.1 Transactions with the Department of
          Human Settlements:
     Subsidy	project	enrolment	fee	(note	14)                                                           	43,520,150	           	17,220,897	

     Insurance	premium	revenue	                                                                       147,786,648             	85,551,957	

     Technical	service	revenue	(note	15)                                                              	183,656,462	           	80,396,035	


     Balances with the Department of Human
     Settlements:
     Trade	receivable	(note	6)                                                                         	67,587,282	           	60,589,406	

     Income	received	in	advance	(note	11)                                                             137,362,821         	222,000,000	


     The	NHBRC	provides	a	warranty	for	both	non-subsidy	and	government	subsidised	homes.	The	fee	payable	by	government	in	the	
     subsidy	market	comprises	1%	project	enrolment	fee,	0.75	%	home	enrolment	fee	and	2.01%	for	consolidated	projects.		The	
     subsidy	income	is	funded	by	national	government	through	the	Department	of	Human	Settlements.


     23.2 Transactions with other related parties are summarised below:
     Key	management	are	individuals	who	have	authority	and	responsibility	for	planning,	directing	and	controlling	the	activities	of	
     Council,	directly	or	indirectly.	
     Trading transactions
     During	the	prior	financial	year,	the	NHBRC	concluded	the	following	trading	transactions	with	related	parties:


                                                                        Expenses                                   Balances
                          Related parties
                                                              2011/2012          2010/2011           2011/2012            2010/2011

                                                                R’000               R’000               R’000                 R’000

     1.	Ahanang	Hardware	and	Construction	CC                       -               	24,075	                -                     -




92   NHBRC ANNuAl REpORT 2011/2012
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                                                                Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



23.2 Transactions with other related parties are summarised below:
     (continued)
Ahanang	 Hardware	 and	 Construction	 CC	 (Ahanang)	 was	 contracted	 by	 the	 NHBRC	 to	 undertake	 inspections	 throughout	 the	
Gauteng	Province	on	behalf	of	the	NHBRC.	This	contract	was	awarded	during	2005,	and	again	during	2007	when	re-advertised:
The	former	Chairperson	of	the	Council,	Ms	Granny	Seape,	had	an	interest	in	Ahanang.	Ms	G	Seape	was	appointed	to	serve	as	a	
member	of	Council	and	Chairperson	of	the	NHBRC	for	a	three-year	term	commencing	1	May	2009	to	30	April	2012.	Ms	G	Seape	
resigned	as	the	Chairperson	of	Council	on	24	January	2011.


24.      Irregular, fruitless and wasteful expenditure
                                                                                                                                       Restated
                                                                                                            2012                            2011
                                                                                                                R                               R
24.1 Fruitless and Wasteful expenditure
	Versatile	Polycrete	Housing	CC	1⁾                                                                              -                      	400,000	
	Interest	paid	to	suppliers	                                                                                	575	                            	255	
                                                                                                            	575	                      	400,255	
 1
     Council	deliberated	and	condoned	this	expenditure	


 24.2 Irregular expenditure


	Rebahale	Consulting		(Pty)	Ltd	2                                                                    	5,411,627	                                 -
	Ms	V	Somiah ⁾  3
                                                                                                     	1,300,000	                                 -
	Rectification	and	Forensics	appointments⁾ 4                                                       113,271,499                                   -
	Non-Subsidy	Inspectorate	appointments	5                                                           	47,732,066	                                  -
	Hydrotek	International	                                                                            17,273,848
	Mokala	Engineers	International	(Pty)	Ltd	                                                         	10,283,370	
	Thekwini	Geocicils	CC	                                                                              	6,031,824	
                                                                                                  	201,304,234	                                  -


2
  Council	appointed	a	task	team	to	review	the	appointment	of	Rebahale	Consulting	(Pty)	Ltd,	and	a	quality	assurance	review	was	
performed	 by	 the	 Institute	 of	 Internal	 Auditors	 on	 the	 work	 done	 by	 Rebahale	 Consulting	 (Pty)	 Limited.	 	 The	 reports	 from	 the	
Institute	of	Internal	Auditors	and	the	Task	team	were	presented	to	Council	and	the	Service	Level	Agreement	with	Rebahale	was	
terminated.	The	appointment	of	Rebahale	was	considered	irregular	due	to	a	conflict	of	interest	during	tender	evaluation.


3
 ⁾The	appointment	of	Ms	Somiah	was	irregular,	the	appointment	was	not	within	the	Delegated	Authority	of	the	CEO,	Council	
suspended	Miss	Somiah.


4
 The appointment of the inspectorate companies contravened the procurement policy. The appointments were above the delegated
Authority	of	the	CEO,	as	a	result	the	total	expenditure	for	the	rectification	programme	have	been	classified	as	irregular.
The	CEO	was	found	guilty	and	there	is	a	recommendation	from	the	Disciplinary	Committee	for		a	summary	dismissal.


 The	 extenstion	 to	 the	 Non-Subsidy	 Inspectorate	 	 contracts	 	 was	 outside	 the	 Delegation	 of	 Authority	 of	 CEO,	 as	 a	 result	 the	
5	

expenditure	has	been	classified	as	irregular.	
The	CEO	was	found	guilty	and	there	is	a	recommendation	from	the	Disciplinary	Committee	for		a	summary	dismissal.




                                                                                                                      NHBRC ANNuAl REpORT 2011/2012    93
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




     25.    Financial instruments
     25.1 Categories of financial instruments and maturity profile


                                                                      0-1 Year             >1 Year              Total
     2012                                                                        R                R                 R


     FINANCIAL ASSETS
     Loans and receivables
     Trade and other receivables                                   	54,272,195	                   -       	54,272,195	
     Cash	and	cash	equivalents                                     	43,050,972	                   -       	43,050,972	


     Available-for-sale financial assets
     Investments                                               	2,031,002,393	       	1,196,717,735	   	3,227,720,128	


     Derivative	financial	instruments                                            -    	465,928,845	     	465,928,845	


     Total financial assets                                    	2,128,325,560	       	1,662,646,580	   	3,790,972,140	


     FINANCIAL LIABILITIES
     Financial liabilities at amortised cost
     Trade and other payables                                      	77,696,583	                   -       	77,696,583	


     2011
     FINANCIAL ASSETS


     Loans and receivables
     Trade and other receivables                                   	30,853,465	                   -       	30,853,465	
     Cash	and	cash	equivalents                                   	354,256,747	                    -     	354,256,747	


     Available-for-sale financial assets
     Investments                                               	1,866,709,556	       	1,252,132,156	   3,118,841,712


     Total financial assets                                    	2,251,819,768	       	1,252,132,156	   	3,503,951,924	


     FINANCIAL LIABILITIES
     Financial liabilities at amortised cost
     This trade in other payables                                  58,835,484                     -       58,835,484




94   NHBRC ANNuAl REpORT 2011/2012
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                                                             Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



25. Financial instruments
25.2 Categories of financial instruments
31	March	2012                                              Loans and             Derivative            Available-                     Total
                                                          Receivables             Financial               for-sale
                                                                               Instruments
Derivative	financial	instruments                                       -       	465,928,845	                       -        	465,928,845	
Available-for-sale	financial	assets                                    -                     -    	3,227,720,128	         	3,227,720,128	
Trade and other receivables                                	59,127,592	                      -                     -          	59,127,592	
Cash	and	cash	equivalents	                                 	43,050,972	                      -                     -          	43,050,972	
Total                                                    	102,178,564	         	465,928,845	      	3,227,720,128	         	3,795,827,537	


31	March	2011
Available-for-sale	financial	assets                                    -                     -     3,118,841,712          3,118,841,712
Trade and other receivables                                	35,606,341	                      -                     -          	35,606,341	
Cash	and	cash	equivalents	                               	354,256,747	                       -                     -        	354,256,747	
Total                                                    	389,863,088	                       -     3,118,841,712          	3,508,704,800	


31	March	2012                                              Financial                    Total
                                                        liabilities at
                                                      Amortised cost
Lease liabilities                                              628,862              628,862
Trade and other payables                                 	251,133,316	         	251,133,316	
Total                                                    	251,762,178	         	251,762,178	
31	March	2011


Lease liabilities                                           	1,995,958	           	1,995,958	
Trade and other payables                                 	326,034,570	         	290,393,143	
Total                                                    	328,030,528	         	292,389,101	


25.3 Liquidity risk
Liquidity	risk	is	the	risk	that	the	NHBRC	will	not	be	able	to	meet	its	financial	obligations	as	they	fall	due.
The	NHBRC	manages	liquidity	risk	by	maintaining	adequate	reserves,	and	banking	facilities,	by	continuously	monitoring	forecast	
and	actual	cashflows	and	matching	the	maturity	profiles	of	financial	assets	and	liabilities.	Refer	to	note	25.1	for	the	maturity	
profile	of	financial	instruments.	
The amounts disclosed in table below are contractual undiscounted cashflows:


At 31 March 2012                                           Less than 3         Between 3         Between 1 year             Over 2 years
                                                              Months         months and 1           and 2 years
                                                                                     year
Operating lease liability                                              -            628,862                        -                       -
Trade and other payables                                   	77,696,585	        137,362,821                         -                       -


At 31 March 2011
Operating lease liability                                              -          	1,995,958	                      -                       -
Trade and other payables                                   	58,835,487	        	222,000,000	                       -                       -




                                                                                                                 NHBRC ANNuAl REpORT 2011/2012    95
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     25.4 Fair value of financial instruments
     The	NHBRC	considers	that	the	 carrying	 amounts	of	trade	 and	 other	 receivables,	cash	and	cash	 equivalents	and	trade	and	other	
     payables	approximates	their	fair	values	due	to	the	short-term	nature	of	these	assets	and	liabilities.		 	
     The	fair	values	of	financial	assets	represent	the	market	value	of	quoted	instruments	and	other	traded	instruments.	For	non-listed	
     investments	and	other	non-traded	financial	assets	fair	value	is	calculated	using	discounted	cash	flows	with	market	assumptions,	
     unless	the	carrying	amount	is	considered	to	approximate	fair	value.		 	        	         	        	         	
     The	fair	values	of	financial	liabilities	carried	at	amortised	cost	is	calculated	based	on	the	present	value	of	the	future	principal	and	
     interest	cash	flows,	discounted	at	the	market	rate	of	interest	at	the	reporting	date.		       	        	         	         	

     25.5 Foreign currency risk
     Foreign	currency	risk	refers	to	the	risk	that	the	fair	value	or	future	cash	flows	of	a	financial	instrument	will	fluctuate	because	of	
     changes	in	foreign	exchange	rates.	The	NHBRC	does	not	undertake	transactions	in	foreign	currencies	and	is	thus	not	unduly	exposed	
     to	foreign	currency	risk.		    	         	         	          	         	


     25.6 Capital risk
     The	NHBRC	manages	its	capital	to	ensure	that	the	NHBRC	will	be	able	to	continue	as	a	going	concern	while	maximising	the	return	to	
     stakeholders	through	the	optimisation	of	the	debt	and	equity	balance.	The	NHBRC’s	overall	strategy	remains	unchanged	from	2010/	
     2011	financial	year.		       	         	         	         	


     25.7 Credit risk
     Credit	risk	refers	to	the	risk	that	the	counterparty	will	default	on	its	contractual	obligations	resulting	in	financial	loss	to	the	NHBRC.	
     Financial	assets,	which	potentially	subject	the	NHBRC	to	concentrations	of	credit	risk,	consists	principally	of	cash	and	cash	equivalents	
     and trade and other receivables.
     The	NHBRC’s	cash	and	cash	equivalents	are	placed	with	high	credit	quality	financial	institutions.	Refer	to	note	6	for	further	information	
     on	the	NHBRC’s	exposure	to	credit	risk	with	regards	to	trade	and	other	receivables.	          	         	          	
     If	there	is	no	independent	rating,	credit	quality	of	the	customer	is	assessed	taking	into	account	the	customer’s	financial	position,	past	
     experience	and	other	factors.
     There	has	been	no	significant	change	during	the	financial	year,	or	since	the	end	of	the	financial	year,	to	the	NHBRC’s	exposure	to	
     credit	risk,	the	approach	to	the	measurement	or	the	objectives,	policies	and	processes	for	managing	this	risk.		The	NHBRC	does	not	
     grant	credit	limits	to	the	the	National	Department	of	Human	Settlements	and	does	not	expect	any	losses	from	non-performance	by	
     the	Human	Settlement	Department.	 	               	        	           	        	          	        	


     25.8 Management risk
     The	underwriting	risk	of	the	NHBRC	is	governed	by	the	Housing	Consumers	Protection	Measures	Act	(Act	No.95	of	1998)	and	the	
     risk	of	defaulting	home	builders.	     	       	        	        	        	         	
     The premiums on the non-subsidy sector are based on the selling price of the home to be constructed, and applied on a sliding scale
     limited	to	a	maximum	premium	of	R34	000	and	a	maximum	claim	of	R500	000	per	home.	                	
     The	premiums	for	the	subsidy	sector	are	based	on	0,75%		and	2.01%	for	consolidated	subsidy	projects.	              	
     The	risk	to	the	NHBRC	and	housing	consumers	is	managed	primarily	through	the	assessment	and	registration	of	home	builders	who	
     have	the	appropriate	financial,	technical,	construction	and	management	capacity	for	their	specific	business.	
     Within	the	insurance	process,	concentration	of	risks	may	arise	in	the	subsidy	market	where	a	particular	event	or	series	of	events	could	
     impact	the	NHBRC	technical	liabilities.	Such	concentrations	may	arise	from	a	single	contract	or	through	a	number	of	related	contracts	
     in concentrated housing developments.
     Approximately	56%	of	the	assets	of	the	NHBRC	are	invested	in	interest	bearing	instruments	and	21%	in	equity	instruments	(shares	and	
     equity	derivatives).	Approximately	R2	billion	(55%)	of	financial	assets	are	expected	to	realise	within	12	months	of	year-end	compared	
     to	approximately	R514	million	of	liabilities	expected	to	be	settled	within	the	same	period.	R1.6	billion	(45%)	of	assets	matures	within	
     12	years,	covering	the	remaining	liability.	Approximately	36%	of	bonds	maturing	in	the	following	12	months	carry	an	AAA	credit	risk	
     rating,	equivalent	to	that	of	government	(government,	parastatal	and	quality	senior	corporate	debt).	29%	of	bonds	carry	a	rating	higher	
     than	A.	35	%	of	bonds	are	rated	BBB	or	have	no	rating.	Approximately	76%	of	bonds	maturing	after	12	months	carry	an	AAA	credit	
     risk	rating.		20%	of	bonds	carry	a	rating	higher	than	A.	4%	of	bonds	are	rated	BBB	or	have	no	rating.	
     The	results	of	the	actuarial	valuation	indicate	that	the	NHBRC	as	a	whole,	including	both	subsidy	and	non-subsidy	houses,	is	solvent	
     and	in	a	sound	financial	position	as	at	31	March	2012	when	valued	on	a	run-off	basis.	The	actuarial	liabilities	are	378%	funded.	
     However,	for	future	business,	the	enrolment	fees	currently	charged	are	inadequate	to	cover	future	expenses	and	liabilities	for	both	
     subsidy and non-subsidy homes.




96   NHBRC ANNuAl REpORT 2011/2012
                                                                                                         NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                                Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



                                                                             Enrolment Fee Adequacy
                                                   All Houses                        Non-Subsidy                           Subsidy
    Utilisation                                 Amount                 %         Amount                   %         Amount                    %
    Enrolments & inspections                      1933                65%            6315               80%               608              40%
    Complaints	conciliations                        293               10%              550               7%               215              14%
    Remedial	claims                                  59               2%               162               2%                   28             2%
                               average               36                                 99                                    17
             99.5% variation margin                  23                                 63                                    11
    Total	expenses	&	claims                       2285                77%            7027               90%               852              56%
    Average fee per enrolment                     2980                               7849                               1509
    Surplus (Deficit)                            695.51               23%          822.21               10%           657.23               44%


                                                                                                                                                  	
The	 key	 risk	 is	 that	 there	 is	 an	 emerging	 trend	 of	 above	 inflation	 increase	 in	 operational	 expenses.	 The	 budgeted	 expenses	 for	
2010/11	being	28%	higher	than	the	2009/10	budgets	as	well	as	budget	expenses	of	2011/12	being	19%	higher	than	the	actual	
expenses	in	2010/11.	For	2011/12,	the	budgeted	expenses	are	11%	higher	than	the	actual	expenses	in	2010/11.	This	has	a	potential	
impact	of	overstating	the	provisions	if	the	budgeted	expenses	are	not	best	estimates.	The	expense	is	not	sufficiently	variable	to	
respond to declining new business volumes.


25.9 Insurance risk
The	primary	insurance	activity	carried	out	by	the	NHBRC	assumes	that	the	risk	to	the	warranty	fund	relates	to	the	warranty	cover	as	
defined	in	the	Act	as	amended.		The	insurance	premiums	are	received	in	advance	as	a	“home	enrolment	fee”	and	a	portion	of	the	
insurance	premium	is	invested	in	terms	of	the	NHBRC	investment	policy	to	cover	future	rectification	of	homes	paid	out	under	the	
warranty scheme.
The	risks	to	the	warranty	fund	are	defined	in	section	3	of	the	Act	“Objects	of	Council”	which	states:	                    	
The	Council	shall:	 	            	          	
-	      represent	the	interests	of	housing	consumers	by	providing	a	warranty	protection	against	defects	in	new	homes;	 	
-	      regulate	the	home	building	industry;	          	          	
-       provide protection to housing consumers in respect of the failure of the home builders to comply with their obligations in
        terms	of	the	Act;	
-	      establish	and	promote	ethical	and	technical	standards	in	the	home	building	industry;	                  	          	
-	      improve	structural	quality	in	the	interests	of	housing	consumers	and	the	home	building	industry;	                 	           	
-	      promote	housing	consumer	rights	and	provide	housing	consumer	information;	                  	          	
-       assist home builders, through training and inspection, to achieve and to maintain satisfactory technical standards of home
        building;	and	
-       achieve the stated objects in the subsidy housing sector.
There	 is	 no	 risk	 categorisation	 in	 determining	 the	 enrolment	 fees	 charged.	 The	 enrolment	 fee	 structure	 is	 promulgated	 in	 the	
regulations	to	the	Act.	Enrolment	fees	are	charged	on	the	selling	price	of	the	home	(including	land	value)	so	that	equal	value	homes	
yield	 equal	 enrolment	 fees.	 The	 subsidy	 and	 non-subsidy	 markets	 each	 have	 their	 own	 enrolment	 fee	 structure.	 The	 NHBRC	 is	
exposed	to	the	uncertainty	surrounding	the	timing	and	severity	of	claims	under	the	warranty	contract.	The	NHBRC	also	has	exposure	
to	market	risk	through	its	insurance	and	investment	activities.	             	         	         	          	
The	NHBRC	uses	several	methods	to	assess	and	monitor	insurance	risk	exposures	for	the	protection	of	housing	consumers.		A	home	
builder	can	only	be	registered	if	he	has	the	appropriate	financial,	technical,	construction	and	management	capacity	for	the	specific	
business	carried	on	by	the	home	builder	in	order	to	protect	housing	consumers	and	the	Council	from	being	exposed	to	unacceptable	
risks.		The	Council	may	withdraw	the	registration	of	a	home	builder	where	the	home	builder	has	been	found	guilty	by	the	disciplinary	
committee	as	prescribed	in	the	Act.	The	insurance	risk	is	further	mitigated	by	the	inspection	of	houses	under	construction,	interdicts	
issued	 against	 home	 builders	 who	 do	 not	 comply	 with	 the	 provisions	 of	 the	 Act	 and	 in	 cases	 of	 a	 late	 enrolments,	 a	 financial	
guarantee	 is	 required	 from	 the	 home	 builder,	 calculated	 on	 a	 risk	 model	 which	 takes	 the	 stage	 of	 completion	 of	 the	 house	 at	
enrolment	date	into	account.	The	financial	guarantee	is	held	for	the	full	five-year	warranty	period.
Risk	 to	 the	 warranty	 fund	 is	 further	 controlled	 by	 the	 inspection	 of	 homes	 during	 the	construction	 phase,	and	 rectifications	 are	
enforced when construction of the home does not comply with the provisions of the Act.
The	NHBRC	has	an	internal	audit	function	which	regularly	reviews	the	degree	of	compliance	with	Council	procedures.



                                                                                                                       NHBRC ANNuAl REpORT 2011/2012   97
     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
     Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



     25.9 Insurance risk (continued)
     Underwriting strategy
     The	registration	of	all	home	builders	is	prescribed	in	terms	of	section	10	of	the	Act.		The	NHBRC	is	obliged	to	register	and	insure	
     all	new	homes	constructed.		The	NHBRC	may	on	the	recommendation	of	the	Council,	on	application	made	to	it,	in	exceptional	
     circumstances,	exempt	a	person	or	home	from	any	provision	of	the	Act.		          	         	       	         	          	

     Reinsurance strategy
     The	NHBRC	does	not	reinsure	any	portion	of	the	risk	it	underwrites	due	to	the	current	low	claim	rate	experienced.	Reinsurance	of	
     the	exposure	to	losses	has	been	identified	as	a	medium-term	strategic	objective.	       	         	         	        	        	

     Terms and conditions of Insurance contracts
     The terms and conditions of insurance contracts that have a material effect on the amount, timing and uncertainty of future cash
     flows arising from insurance contracts are set out below:
     The	NHBRC’s	main	business	is	highly	specialised,	and	covers	the	rectification	of:		             	          	          	         	
     -	    m
           	 ajor	structural	defects	in	a	home	caused	by	non-compliance	with	the	NHBRC	technical	requirements	within	a	period	of	five	
           years	from	the	occupation	date;	 	          	        	        	         	       	         	
     -		   	 on-compliance	with	or	deviation	from	the	terms,	plans	and	specification	or	the	agreement	of	any	deficiency	related	to	design,	
           n
           workmanship	or	material	notified	to	the	home	builder	by	the	housing	consumer	within	three	months	from	the	occupation	
           date;	and	 	 	          	         	         	         	         	
     -		   r
           	 epair	roof	leaks	attributable	to	workmanship,	design	or	materials	occurring	and	notified	to	the	home	builder	by	the	housing	
           consumer within 12 months of the occupation date.
     The event giving rise to a claim occurs with the insolvency, liquidation and protracted default of the home builder. The claim will
     be	notified	to	the	NHBRC	in	terms	of	the	specific	regulations	to	the	Act.	The	business	of	the	NHBRC	can	be	classified	as	short-to	
     long-term	as	the	NHBRC	may	only	be	notified	of	a	claim	up	to	five	years	after	occupation	of	the	home	in	the	instance	of	structural	
     defects.


     Concentration of insurance risk
     Insurance risk by geographical area
     The	 geographical	 concentration	 of	 home	 enrolments	 is	 predominantly	 in	 the	 Gauteng	 province	 (50%)	 and	 the	 Western	 Cape	
     province	(15.6%).	The	Western	Cape	has	a	lower	complaints	ratio	relative	to	KwaZulu-Natal,	Gauteng,	Free	State	and	the	Eastern	
     Cape	which	have	the	highest	complaints	rate.	 	               	       	           	        	          	         	
     Insurance risk by developer
     The	risk	per	developer	is	ranked	by	units	of	exposure	(enrolments	after	Sep	2006).	Liquidation	of	the	15	largest	developers	constitute	
     R226,3	 million	 of	 sum	 insured	 (comparison	 of	 300	 154	 home	 enrolments)	 which	 could	 potentially	 increase	 claims	 against	 the	
     warranty fund.


     25.10 Interest rate and price risk
     Interest rate risk
     Interest	rate	risk	refers	to	the	risk	that	the	fair	value	of	future	cash	flows	of	a	financial	instrument	will	fluctuate	because	of	changes	in	
     market	interest	rates.	All	cash	surpluses	are	invested	with	investment	fund	managers	in	terms	of	the	investment	policy.	The	exposure	
     to	interest	rate	risk	is	determined	by	the	maturity	profile	of	investments	(see	note	4).		          	         	         	         	         	

     Price risk
     Price	risk	refers	to	the	risk	that	the	fair	value	or	future	cash	flows	of	a	financial	instrument	will	fluctuate	because	of	changes	in	market	
     prices	other	than	those	arising	from	interest	rate	risk	or	foreign	currency	risk.	The	NHBRC	is	exposed	to	equity	price	risk	as	it	holds	
     equity	securities	classified	as	available	for	sale.	However,	due	to	the	investments	in	equities	being	immaterial,	the	exposure	to	equity	
     risk	is	limited.	




98   NHBRC ANNuAl REpORT 2011/2012
                                                                                             NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                      Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



Sensitivity analysis
                                                                         31 March 2012

                                                                                   Interest	rate	risk

                                       Carrying	                                      Reasonable	possible	change	
                                     amount at 31      Rand	amount	       Rate	                           Rate	
                                      March	2012      exposed	to	risk   increase    Rand	amount         decrease       Rand	amount
Financial Assets

Cash	investments                     	2,031,002,393	 	2,031,002,393	        1%        	20,310,024	            -1%      	(20,310,024)

Listed bond securities

-	Short-term	<	7	years                	151,283,489	    	151,283,489	        1%          	1,512,835	           -1%        	(1,512,835)

- Medium-term 7 to 12 years            111,369,642      111,369,642         1%           1,113,696            -1%        	(1,113,696)

-	Long-term	>	12	years                	569,835,395	    	569,835,395	        1%          	5,698,354	           -1%        	(5,698,354)

-	Inflation-linked	bonds              	364,229,209	    	364,229,209	        3%        	10,926,876	            -3%      	(10,926,876)

Derivative	financial	instruments      	465,928,845	    	465,928,845	        1%          	4,659,288	           -1%        	(4,659,288)
Impact of financial assets on:

Statement	of	changes	in	net	assets

Statement	of	financial	performance                                                    	39,561,785	                     	(39,561,785)

Impact	on	financial	position         3,693,648,973    3,693,648,973                   	39,561,785	                     	(39,561,785)




                                                                         31 March 2011

                                                                                   Interest	rate	risk
                                                                                      Reasonable	possible	change	
                                       Carrying	
                                     amount at 31      Rand	amount	       Rate	                           Rate	
                                      March	2012      exposed	to	risk   increase    Rand	amount         decrease       Rand	amount
Financial Assets

Cash	investments                     	1,866,709,556	 	1,866,709,556	        1%        	18,667,096	            -1%      	(18,667,096)

Listed bond securities

-	Short-term	<	7	years                	317,932,557	    	317,932,557	        1%           3,179,326            -1%        	(3,179,326)

- Medium-term 7 to 12 years           	132,455,150	    	132,455,150	        1%          	1,324,552	           -1%        	(1,324,552)

-	Long-term	>	12	years                 569,835,395      569,835,395         1%           5,698,354            -1%        (5,698,354)

-	Inflation-linked	bonds               626,426,624      626,426,624         3%         18,792,799             -3%      	(18,792,799)

Equity


Impact of financial assets on:

Statement	of	changes	in	net	assets

Statement	of	financial	performance                                                    	43,716,950	                     	(43,716,950)

Impact	on	financial	position         3,118,841,712    3,118,841,712                   	43,716,950	                     	(43,716,950)




                                                                                                          NHBRC ANNuAl REpORT 2011/2012    99
      NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
      Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




      26. Contingent liabilities
      The	NHBRC	terminated	the	outsourced	Service	Level	Agreement	with	Rebahale	Consulting	(Pty)	Limited,	as	a	result	of	this	termination	
      the	NHBRC	may	have	a	potential	liability	approximating	R20	074	080.
      There	are	outstanding	claims	pending	in	the	Courts	in	relation	to	disputes	between	the	NHBRC	and	service	providers	amounting	to	
      R3	663	740,	the	outcome	of	which	is	unknown.


      27.    Post reporting date events
      No	material	facts	or	circumstances	have	arisen	after	the	reporting	date	which	affects	the	financial	position	of	the	NHBRC	as	reflected	
      in	the	annual	financial	statements.


      28. Errors and reclassifications
      The	errors	and	reclassifications	relates	to	the	understatement	of	revenue.		The	prior	year	financial	results	have	been	restated
      The	impact	on	the	Statement	of	Financial	Performance	and	Statement	of	Financial	Position	is	shown	below.


                                                              Balance previously                  Adjustment            Restated balance
                                                                          stated
      Accumulated surplus at 31 March 2011                          2,381,477,402                  26,451,061               2,407,928,463
      Surplus at 31 March 2011                                        335,203,896                  26,451,061                 361,654,957


      Statement of Financial Performance
      Fee	revenue	(Note	14)                                           	27,258,672	                   4,649,261                 	31,907,933	
      -			Subsidy	project	enrolment	fee                               	12,571,636	                   4,649,261                 	17,220,897	


      Technical	Services	Revenue
         F
      -			 orensic	audit,	Geo-tech	and	rectification	                 	58,594,235	                 	21,801,800	                	80,396,035	
         work


      Statement of Financial Position
      Trade	and	other	receivables	(Note	6)                              	9,155,280	                	26,451,061	                	35,606,341	
      -		Net	trade	receivables                                          	4,387,335	                	26,451,061	                	30,838,396	
      - Trade receivables                                              34,138,346                  	26,451,061	                	60,589,408	


      Notes to the Cash Flow Statement


      Changes	in	working	capital
      Decrease/(Increase)	in	trade	and	other	                         	42,056,528	               	(26,451,061)                 	15,605,466	
      receivables
      Financial Instruments
      Financial Assets (Note 25.1)
      - Trade and other receivables                                     	9,155,281	                	26,451,061	                	35,606,342	
      -		Total	financial	assets                                    	2,230,121,584	                 	26,451,061	             	2,256,572,644	




100   NHBRC ANNuAl REpORT 2011/2012
                                                                                                NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
                                                         Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012



29.   Reconciliation of budget surplus with the surplus in the Statement of Financial Performance


Net surplus per approved budget                                                                                          	258,382,472	


Adjusted for

Movement in technical provisions

Emerging contractor reserve                                                                                               	(5,403,657)

Revenue                                                                                                                  	258,527,234	

Expenditure                                                                                                               	13,577,013	

Technical	expenditure                                                                                                  	(173,203,203)

Realised	profit	on	sale	of	financial	assets                                                                               	33,884,089	

interest received                                                                                                        	(58,325,732)


Net surplus from operations                                                                                               327,438,216

Movement in technical provisions not budgeted                                                                          	(193,874,094)


Net surplus per the Statement of Financial Performance                                                                   	133,564,122	


The	major	variances	between	the	budgeted	surplus	and	Statement	of	Financial	Performance	are	due	to	the	following	factors:


Revenue
Revenue	increased	by	R61	million	compared	to	budget.	The	increase	in	the	volumes	of	work	done	for	technical	services	contributed	
to this increase. The lower project enrolments fees in the subsidy sector was partly recovered by higher than budgeted non-subsidy
home enrolments.


Technical provisions
The technical provisions are assessed annually by independent actuaries and are not budgeted.


Expenditure
Total	operating	expenditure	and	fixed	expenditure	were	stringently	managed	by	the	organisation	so	as	to	ensure	that	the	savings	
in	expenditure.	


Technical expenditure
The	over	spend	in	technical	expenditure	has	been	fully	recovered	by	the	increase	in	revenue	generated	in	the	KZN	projects.


Income from investments
The	investment	strategy	followed	by	the	entity	is	to	maximise	the	return	on	cash	investments	when	the	bond	and	equity	market	
were	declining.	The	repo	rate	remained	unchanged	for	the	financial	year	whilst	the	budget	was	based	on	the	assumption	that	the	
repo rate would increase.




                                                                                                             NHBRC ANNuAl REpORT 2011/2012    101
      NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
      Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




102   NHBRC ANNuAl REpORT 2011/2012
                                     NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




                                                  NHBRC ANNuAl REpORT 2011/2012    103
      NATIONAl HOME BuIlDERS REGISTRATION COuNCIl
      Notes	to	the	Annual	financial	statements	for	the	year	ended	31	March	2012




104   NHBRC ANNuAl REpORT 2011/2012
NHBRC Head Office
10 Muswell Road South
Phase 4 Medscheme Building
Bryanston, Johannesburg

PO Box 461, Randburg, 2125
Docex 96 Randburg

tel:             +27 (0) 11 317 0000
Fax:             +27 (0) 11 317 0105
tollfree:        0800 200 824
Website:         www.nhbrc.org.za
Fraud Hotline:   0800 203 698




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